Not many decisions are easy in the life of a CFO...

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...but smart financial executives quickly recognize opportunities that offer a significant upside, minimal risk and require negligible effort to initiate.

A CFO of a division of an EVA driven Fortune 500 Company always kept an eye out for innovations that could improve the financial performance of his organization. After noticing the improvement of accounts receivable at an organization being considered for acquisition and learning that the success was attributed to CashFlow Enhancement Group, the CFO had his controller contact CashFlow Enhancement Group.

The program proposed by CashFlow Enhancement Group would allow for easy measurement of results, no immediate staffing changes and virtually no implementation efforts. If the program was unsuccessful, the cost associated with the program was small and the effort to revert back to operations prior to the program relatively easy. The most attractive feature: The potential upside from improved A/R performance would be a very material benefit.

This CFO found the decision to be very easy. “If the program becomes EVA positive in one quarter, the engagement continues.”

DSO averaged in the mid to high sixties, which was at the low end for their industry. To become EVA positive, DSO needed to drop 5% to just above 63. But the organization’s credit manager was skeptical of the more significant improvements being pursued by CashFlow Enhancement Group. “I don’t see you dropping DSO to 62 and you will never get DSO below 60.”

The Results

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One quarter later, DSO hit 60. The program was easily EVA positive. Subsequently DSO dropped and held in the mid fifties. Later that same year, the client was able to reassign a portion of the A/R staff to fill needs in other areas, further adding to the value of the program.

Shortly thereafter, the CFO left this company to accept a CFO position at a division of a Fortune 100 Company. He called CashFlow Enhancement Group his first week in the new position. “You made me look like a hero once, let’s do it again here.”

DSO at his new location averaged in the mid sixties. A short time later, DSO dropped to the high forties to low fifties.