Gorilla and King Portfolio Candidates Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Gorilla and King Portfolio Candidates

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Mike Buckley who wrote (30401)	8/24/2000 4:35:50 PM
From: sditto	Read Replies (3) of 54805

<<A receivable doesn't become such until an invoice is rendered. >> In the software world it's a little more complicated than that. In general, companies buying packaged software applications tend to dictate payment terms based on achievement of specific implementation milestones (e.g., contract signing (20%), final design (20%), testing (20%) enterprise go-live (20%), final acceptance (20%), etc.) This is highly simplified but you get the point. Stronger vendors (or better negotiators) get a higher percentage up-front whereas weaker vendors (or those wishing to differentiate through financial terms) slide it back. Occasionally, hardware, software, and labor costs are paid on slightly different schedules to more closely match expenses to revenues. Financial reporting practices among software firms can and do vary but in general there are two components to this part of the financial cycle. The interval of time between work being performed and billed is often referred to as work in progress (WIP). The interval of time between a bill being rendered and payment received is often referred to as Accounts Receivable (A/R). Some companies report both numbers separately while others simply report the sum and call it A/R. No matter how you report it, the two-step process of converting WIP to A/R and A/R to cash is the essence of good cash flow management and a hallmark of Gorilla power. Payment milestones can often be months apart so management of WIP is important. Additionally, bills are often rendered to client project sponsors directly (not the A/P department) and are withheld until all milestone criteria have been met or as negotiating leverage when there is a change in the scope of work. All of these issues contribute to high Days Sales Outstanding (DSOs) and a poor cash conversion cycle (CCC) for companies that get sloppy in client, project, and billing management. In almost no case is an increasing DSO or a DSO out of line with peer or industry norms (when compared on an apples-to-apples basis) a good thing.

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next