Our weekly scorecard shows that service delivery is on time, client satisfaction is high, and sales are hitting their targets, but our accounts receivable aging is quietly blowing up and stalling our cash flow. How do we restructure our metrics to prevent this?

Question

Tyler Smith · Accepted Answer

Your scorecard is showing green because your metrics are focused on activity rather than business outcomes. Delivering on time and keeping customers happy is irrelevant if you are not getting paid. Cash is oxygen, and if your accounts receivable aging is blowing up, your scorecard has a major blind spot. You need to pull cash and collection metrics out of the back office and place them on the leadership scorecard where they belong. The solution is to introduce a weekly leading indicator for cash collection efficiency. Do not just track total revenue or monthly bank balances. Add weekly accounts receivable over forty-five days to your scorecard. Another strong leading indicator is average days sales outstanding, updated weekly. When your operational leaders see how unpaid invoices directly impact the cash reserves of the business, they will begin to align their delivery terms with payment collections. Your sales and operations leaders must understand that a sale is not a sale until the cash is in the bank. If operational metrics are green but this financial collection metric is red, it is an automatic issue for your Level 10 Meeting™. Use IDS® to find out why clients are holding back payments. This forces your leadership team to protect the financial health of the business rather than hiding behind their own functional silos.