days sales outstanding

The largest North American companies improved their cash conversion cycle by 0.2 days last year, entirely by paying suppliers 2.9 days later. For a $20 million supplier, a 15-day extension ties up $822,000 and costs about $74,000 a year.

An engineering firm waits 90 days between doing the work and being paid for it. Thirty-one of those days come from its own billing process, worth about $1.02 million of cash. The other 59 days are a real financing need.

Customers moved from net 30 to net 60, which tied up an extra $1.08 million. The consequence shows up on the other side of the business, where $162,000 of supplier discounts go unclaimed every year because the cash is not there.