It’s not often accounting folks get to wear a cape and be the hero of the story. There just aren’t many fairy tales where a Big 4 CPA turns business operator, revolutionizes the collection process, and gets a day named after them in their hometown.
But make no mistake, if you see the cash conversion cycle in action - I mean truly RIPPING - it’s nothing short of magic.
Maybe I shouldn’t say “see.” The CCC is something you have to “feel” to truly understand. I experienced its wonders first hand last year. I’m the CFO at a company where we got our Days Sales Outstanding (DSO) down from 55 days to 37 days in the course of a year. That’s an 18 day improvement, or 33%.
And through some shrewd negotiating, we got our Days Payable Outstanding (DPO) up from 35 days to 47.
And since we are a company that doesn’t produce any physical widgets, we had no inventory. So our Cash Conversion Cycle was now negative 10 days.
From Tactical Changes to Real Results
What’s the net of it all? As a cash-burning company, this allowed us to hire three more people over the course of 12 months. Those three people happened to be developers, who helped us get new products to market faster, and increase revenues.
OK, so let’s get tactical. How did we do it?
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