yount hyde & barbour
Get a Grip: Handling Write Offs, WIP, Realization and Collections Effectively Presented by August Aquila
AQUILA Global Advisors www.AquilaAdvisors.com
1
Objectives • Learn how to increase cash flow • Reduce write downs and bad debt reserves • Reduce interest expenses • Increase productivity of employees and partners
2
Dunn & Bradstreet Reports • A new business oven every minute or so • A business bankruptcy is filed every 8 minutes or so • A business closes every 3 minutes or so • A suit, lien or judgement is filed against a company every 14 seconds • A chief executive officer changes every minute • A company names change occurs every 2 minutes
3
Check Before You Accept • Complete new client information sheet • Order a D&B Credit Report for major accounts • Banking information – some banks may release credit information • Check with the former accountant or attorney • Check with the Secretary of State to determine date of incorporation and standing
4
Polling Question #1 • Are you satisfied with your client acceptance process? 1. Yes 2. No 3. Somewhat 4. I don’t know
5
Best Practices Client Acceptance • All new business clients need to complete a client information worksheet before an engagement letter is generated • All new business clients need to have a credit risk analysis completed prior to generating an engagement letter • All business clients, that have the potential to be an engagement of $XXXX annually, must have a credit report completed prior to generating an engagement letter. 6
The Five C’s of Credit 1. Capital 2. Capacity
3. Conditions 4. Collateral 5. Character
7
Best Practices – Engagement Letters 1. Scope of the service and fees are clearly defined 2. Payment arrangements are outlined 3. Engagement letter is discussed in person 4. Engagement letter is signed
8
Polling Question #2 • How satisfied are you with your engagement letters? 1. Very satisfied 2. Somewhat satisfied 3. Neither satisfied or unsatisfied 4. Somewhat unsatisfied 5. Very unsatisfied
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Work in Process (WIP) • It all begins with WIP • WIP is the amount attributed to work performed for clients but not yet billed • This is often stated as standard fees
10
Best Practices – WIP 1. Time entered daily by everyone 2. Time is uploaded daily
3. WIP is reviewed daily or weekly 4. WIP over 60 days is monitored
11
Write Downs • Difference between WIP and what you bill the client • Schools of thoughts about WIP – It’s a function of pricing – It’s a function of management – Different practice areas/services are going to have different write downs
12
Best Practices – Write Downs 1. Develop budgets for all business engagements 2. Have approval for all write downs of 10% or more 3. Use planned write downs
13
Polling Question # 3 • Do you feel you have control over write downs? 1. Complete control 2. Some Control 3. No Control 4. I don’t know
14
Best Practices - Invoices 1. Generate invoices daily 2. Have a fixed cut-off date towardthe end of the month 3. Describe work done in a manner that the client requires 4. Use format that allows for free form verbiage 5. Print on invoice: “Payment due upon receipt” 6. Charge clients interest on late payments 7. Send via email 15
Top 3 Collection Excuses 1. I have a cash flow problem 2. Didn’t get a copy of the invoice
3. Not happy with the service
16
The Collection Process • 30 to 40 days – call client • 60 to 70 days – call client and send 60 day notice • 70 to 90 days – call client and send 75 day notice • 90 days – send 90 day notice • 120-150 days – call the primary biller and owner • Over 150 days – send to collection agency • 210 days – take legal action or write it off 17
Polling Question #4 • Are your receivables 1. Over 150 days on average 2. Between 125 and 150 days 3. Between 100 and 125 4. Between 75 and 100 5. I don’t know
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How to Increase Productivity • Provide weekly charge hour goals for all billers • Capture all time • Don’t make billing decision at the time your record time • Increase partner/staff leverage • All overtime hours should be chargeable • Use a 50 minute hour • Manage non-chargeable time
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Questions • What didn’t I discuss that you want to talk about • Is there anything I did not make clear • What else is on your mind?
20
For More Information & Free Consultation
Contact: August Aquila [email protected] 952.930.1295
AQUILA Global Advisors, www.AquilaAdvisors.com
21
AQUILA Global Advisors www.AquilaAdvisors.com
1
Objectives • Learn how to increase cash flow • Reduce write downs and bad debt reserves • Reduce interest expenses • Increase productivity of employees and partners
2
Dunn & Bradstreet Reports • A new business oven every minute or so • A business bankruptcy is filed every 8 minutes or so • A business closes every 3 minutes or so • A suit, lien or judgement is filed against a company every 14 seconds • A chief executive officer changes every minute • A company names change occurs every 2 minutes
3
Check Before You Accept • Complete new client information sheet • Order a D&B Credit Report for major accounts • Banking information – some banks may release credit information • Check with the former accountant or attorney • Check with the Secretary of State to determine date of incorporation and standing
4
Polling Question #1 • Are you satisfied with your client acceptance process? 1. Yes 2. No 3. Somewhat 4. I don’t know
5
Best Practices Client Acceptance • All new business clients need to complete a client information worksheet before an engagement letter is generated • All new business clients need to have a credit risk analysis completed prior to generating an engagement letter • All business clients, that have the potential to be an engagement of $XXXX annually, must have a credit report completed prior to generating an engagement letter. 6
The Five C’s of Credit 1. Capital 2. Capacity
3. Conditions 4. Collateral 5. Character
7
Best Practices – Engagement Letters 1. Scope of the service and fees are clearly defined 2. Payment arrangements are outlined 3. Engagement letter is discussed in person 4. Engagement letter is signed
8
Polling Question #2 • How satisfied are you with your engagement letters? 1. Very satisfied 2. Somewhat satisfied 3. Neither satisfied or unsatisfied 4. Somewhat unsatisfied 5. Very unsatisfied
9
Work in Process (WIP) • It all begins with WIP • WIP is the amount attributed to work performed for clients but not yet billed • This is often stated as standard fees
10
Best Practices – WIP 1. Time entered daily by everyone 2. Time is uploaded daily
3. WIP is reviewed daily or weekly 4. WIP over 60 days is monitored
11
Write Downs • Difference between WIP and what you bill the client • Schools of thoughts about WIP – It’s a function of pricing – It’s a function of management – Different practice areas/services are going to have different write downs
12
Best Practices – Write Downs 1. Develop budgets for all business engagements 2. Have approval for all write downs of 10% or more 3. Use planned write downs
13
Polling Question # 3 • Do you feel you have control over write downs? 1. Complete control 2. Some Control 3. No Control 4. I don’t know
14
Best Practices - Invoices 1. Generate invoices daily 2. Have a fixed cut-off date towardthe end of the month 3. Describe work done in a manner that the client requires 4. Use format that allows for free form verbiage 5. Print on invoice: “Payment due upon receipt” 6. Charge clients interest on late payments 7. Send via email 15
Top 3 Collection Excuses 1. I have a cash flow problem 2. Didn’t get a copy of the invoice
3. Not happy with the service
16
The Collection Process • 30 to 40 days – call client • 60 to 70 days – call client and send 60 day notice • 70 to 90 days – call client and send 75 day notice • 90 days – send 90 day notice • 120-150 days – call the primary biller and owner • Over 150 days – send to collection agency • 210 days – take legal action or write it off 17
Polling Question #4 • Are your receivables 1. Over 150 days on average 2. Between 125 and 150 days 3. Between 100 and 125 4. Between 75 and 100 5. I don’t know
18
How to Increase Productivity • Provide weekly charge hour goals for all billers • Capture all time • Don’t make billing decision at the time your record time • Increase partner/staff leverage • All overtime hours should be chargeable • Use a 50 minute hour • Manage non-chargeable time
19
Questions • What didn’t I discuss that you want to talk about • Is there anything I did not make clear • What else is on your mind?
20
For More Information & Free Consultation
Contact: August Aquila [email protected] 952.930.1295
AQUILA Global Advisors, www.AquilaAdvisors.com
21
