A Quick Dive Into Basics

The more and more that I write the more clarity I gain. It’s not because I dive into the details, which are for sure important. But I realize that most issues aren’t resolved at the fundamental levels. As I listen, learn, and read about those who are at the top of their game, whether that is in business, the military, sports, snipers, or even parents they all have tremendous fundamentals.

Now, I’m going to relate this to the fundamentals that I see in A/E firms specifically. The concepts apply broadly, but the specifics will be in A/E firms. First, let’s talk about some of the fundamentals in cash flow, the life blood of a business.

With A/E firms, cash conversion cycle is not talked about. As a project manager within an MEP firm, I did not know what any of those words meant. All I was responsible for at the end of the month was letting accounting know what percentage complete of the current milestone we were on so that they could bill the owner.

Now, if I knew anything about cash conversion cycles and that increasing those would improve the business, I would have managed my projects differently. Instead of managing to the arbitrary deadlines set by clients, I would have looked to complete milestones at different points on the calendar to maximize cash.

Something as basic as cash and how much is collected seems to be neglected in companies. Whether its because people don’t like talking about money, yet expect a pay check every pay period. Or it could be they feel uncomfortable about billing. Whatever the reason is, it’s not talked about.

Yet, if cash flow and cash conversion cycles are prioritized then the health of the project could be affected. Having a CFO run operations is never a good thing, but operations should be informed by finance. What I mean by this is if a deadline could be moved from the 30th to the 25th when the reports are due to accounting to bill, it would improve cash drastically. Because instead of billing at 95% of the milestone, you could now bill at 100% and save yourself 35 days playing the bank.

That 5% spread across all of your projects would make a world of difference when it comes to cash collected. This is where being informed and providing that type of information to your team would come in handy. Not all projects are going to make that shift. Those extra days are absolutely necessary, but some of the time it might be possible to shift it forward.

There is setting up the process of having project milestones between the 15th and the 25th to maximize cash. Setting schedules to this would make a world of difference.

In going through this simple exercise, what I’ve found is that we focus in on these little details, but don’t take the time to zoom back out to the macro. Asking ourselves the question of why does this matter? Why is this important? What is the purpose behind this?

Getting great at the fundamentals of each area in your business, like cash flow, like deadlines, like the types of content you use and how your templates are setup. Those basics, matter a whole lot to the success of your organization.?