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

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

aaquila@aquilaadvisors.com

952.930.1295

AQUILA Global Advisors,

www.AquilaAdvisors.com

21