Overview
Business challenge
The client base is a balanced blend sourced from both the Upwork platform and targeted marketing endeavors, ensuring
a diverse range of projects. The flexible contracting model reflects the company`s commitment to meeting client needs,
with a wide range of approaches fixed price basis, time and materials (T&M), staffing augmentation, and projects
technical support. Each project, with an average value of $10k, typically requires the involvement of 1-2 full-time
employees (FTEs) alongside essential non-billable project management work.
The company's top management struggled with searching for a financial balance.
In the recent past, the company faced one of its most significant client debt issues to date. As 2023 drew to a
close, the situation was exacerbated, as senior executives were preoccupied with Europe's on-site sales endeavors,
thus impeding their ability to monitor monthly accounts receivable effectively. Furthermore, project managers'
attention was diverted, leading to reduced oversight of client debt management.
Complication: Clients engaged through Upwork maintained a good record of debt-free transactions. However, within
the client portfolio, there were 1-2 accounts where indebtedness exceeded 30% of the company's monthly income.
Notably, some outstanding account receivables surpassed the 90-day mark, contributing to a cumulative increase in
the overall arrears.
The company experienced problems with gaining new clients and in the last 6 months showed extremely deteriorating
EBITDA.
Transformation
With Da`at Consulting's involvement, the management of accounts receivable was streamlined through collaboration
among three key departments: delivery, finance, and account management. This synergy resulted in a reduction of the
company's overall arrears level and a positive transformation in the structure of overdue debts.
Results
The implementation took 5 months, and the progress in decreasing the overdue debts was obvious from the first month
of the implementation and still showed the results after finishing the collaboration with Da'at Consulting.
Delivery debt control
The Delivery Department specified the process of negotiations with clients to help them pay due to contract
terms.
Account receivables analysis
The analysis of account receivables was established with the Financial Department on a monthly basis. The
analysis provides information with regard to overdue terms, clients' LTV, and previous client history to
make the decision-making process easier for C-Level management.
The strategy of negotiations was set up.
The strategy of negotiations with the clients who had the bigger debts turned to the tactical process and
succeeded in significantly reducing client debts.
Process of prevention of client debt
A transparent process of clients' debt prevention was learned by the Delivery Department, which was
immediately mirrored in the change of clients' debt structure (30, 60, 90 days).
The next steps are planned and scheduled
The company has an understanding of improvements and is going to work with the Legal Department to change
the templates of contracts, as well as the Business Development Department will adapt the business rules
for the work with new clients, etc.
Few key numbers
26%
Reduction of accounts receivable during the quarter
$96k
returned within one month of collaboration
Business challenge story
“— We are in good relationships with clients,
but unfortunately, some of them aren't able to pay accurately. ”
The first analysis and the review of the company client's portfolio show the following situation:
- The company is struggling with a prevalent issue within the IT Outsourcing market: low conversion rates from
leads to clients, consequently impacting revenue streams.
- Two clients stand out with substantial debts spanning over 30, 60, and 90 days, with no clarity on the timeline
for debt resolution.
- A considerable sum of money remains overdue for more than 90 days, raising concerns about cash flow management.
- CEO approval for payment termination has been granted in select cases, based on specific client relationships
and prior collaborations.
- The responsibility for managing client accounts receivable is not clearly delineated.
- There is a noticeable absence of an established debt control process within the company's operations.
The company shows good potential for the company processes improvements. The highlighted areas for implementation
are the following:
- Implement a structured framework for monitoring clients' payment discipline within the Delivery Department.
- Foster collaboration through cross-functional processes with other departments to streamline debt management
procedures.
- Adjust roles and responsibilities within the Delivery Department to incorporate oversight of clients' debt
control.
- Introduce a routine analysis of accounts receivables and the company portfolio to ensure timely action on
outstanding debts.
- Implement updates to certain processes within the Business Development and Legal Departments to enhance debt
management efficacy.
These enhancements to the company processes are crafted with the aim of diminishing accounts receivable and
fostering greater business predictability as an outcome.
Transformation story
Once the comprehensive assessment was completed, the company initiated the execution of the plan. The portfolio audit illuminated the necessary adjustments to be made.
In the first month, the company successfully recovered a portion of outstanding client debts while implementing measures that not only diminished the overall debt level but also restructured the clients' debt profiles. Notably, a significant portion of overdue payments shifted from a 90-day to a 30-day timeframe, indicating enhanced receivables management.
The introduction of monthly accounts receivable analyses facilitated a clearer insight into cash flow dynamics, fostering improved transparency, and more effective planning within the organization. Moreover, it served as a proactive measure to mitigate the accumulation of outstanding debts from certain clients.
Results story
The company got under control the very important KPI and improved the processes related to clients' collaboration
and the company's financial health.
The company leveraged funds from its accounts receivable to strategically allocate resources toward marketing and
sales efforts aimed at acquiring new clients.
Throughout the project, there were no instances of client payment refusal, and the company maintained positive
relationships with all clients.
Da'at Consulting drove all the phases of the project and took part in all the activities related to the planning
and execution of the plan.
