Collections and Retention Trend Metric

Assuming that a contractor’s project team has done an effective job of aggressively billing the project, the biggest variable that remains for cash flow is the effectiveness of collections.

D. Brown Management Profile Picture
Share

A good way to look at this is in your aging buckets as a percentage of the total outstanding, excluding retention.  

Cash Flow: Collections Performance and Retention Trend.

You should see very little in the 91-plus day part of the bar chart, maybe a minor red tip at the worst.  

You should see a trend of the total percentage of your receivables that are 1-30 days or more past due coming down. We have seen contractors get these below 10% with rigorous attention to the collection process

The other trend to look at on this same graph is your retention outstanding. It is very easy for a contractor to get into growth mode and only taking on longer-term projects to have all their cash held in retention.  

Retention outstanding can be dramatically reduced by:


Collections and Retention Trend Metric
Great cash flow is a key driver of valuation and successful successions. Running out of cash is is the #1 reason contractors fail. Improving cash flow improves your Return on Equity. Protect yourself and never let cash flow be the limitation to your profitable growth....

Collections and Retention Trend Metric
Great cash flow is a key driver of valuation and successful successions. Running out of cash is is the #1 reason contractors fail. Improving cash flow improves your Return on Equity. Protect yourself and never let cash flow be the limitation to your profitable growth....

Attracting and Retaining Talent: The Five Most Important Questions
To attract and retain the best talent, everyone on your team must be able to clearly answer these five questions. Your answers must be competitive with the other choices a potential new team member has.
Appearance and Experience of Management Control
As your career develops and you grow into roles of greater responsibility, one of the biggest challenges is what Jennifer Garvey Berger calls “The paradox of the appearance of increasing control and the experience of decreasing control.”
Cash Flow Tip 18 - Making Cash Flow a Game
Imagine creating a culture where everyone ran into work with the same energy that fans and players run into a sporting event.