Eliminate these 10 common obstacles to turning revenue into cash to drop DSO in your organization. UPDATED CONTACT INFO: Eric McCamey 541.491.4949

1. YOUR LOGO
Ten Enemies of GovCon
Cash Flow
Eric McCamey
08 March 2016
Eric.McCamey@NymbusCorp.com

2. A Simple, but Infrequently Communicated
Message…
Cash is king
 Time Value of Money
 A dollar today is worth more than a dollar tomorrow
 Inflation
 Cost of capital – working for you or against you
 Every dollar that is in my pocket today, I can make work FOR me
 How fast your company turns revenues into cash is paramount.
 Revenues recognized, sales made, that never turn into cash are
meaningless.

3. Contract to Cash Process Overview
Negotiate
Billing and
Payment
Terms
Setup Project
in Accounting
System
Setup
Vendor/Sub
Purchase
Orders (P.O.’s)
Charge labor,
pay invoices
against P.O.s,
ODCs, etc.
Recognize
Revenue
(Cr Revenue, Dr
Unbilled A/R)
Manage
Invoice Cycle
and Approval
Processes
Generate
Invoices
(Cr Unbilled A/R, Dr
Billed A/R)
Send Invoices
Facilitate
Collections
Receive and
Post Cash
(Cr Billed A/R, Dr
Cash)
Main “Take Away”?
• See your cash generation process as something that
starts long before you start to generate invoices.
• There are elements to monitor and optimize at EACH
step.

4. An Often Unrecognized Truth…
 What influences cash flow most are the things that you do:
 Before the contract is ever signed
 As you setup your project accounting systems
 As you monitor and control costs and performance
The cause and solution to cash flow problems is not found
in the Accounts Receivable (Billing) Department.

5. CASH FLOW ENEMY #1
The Contract Itself

6. Issues Stemming from the Negotiated
Contract
 Many cash flow issues come from contracts with
 Unfavorable payment terms
 Onerous billing formats
 Onerous invoice supporting schedules
 Reporting requirements improperly tied to invoicing
Avoid like the plague…
• Anything unique that requires your team to do something
differently than what is natural to the system or good processes.
• Invoices manually generated in Excel
In the long run, these choices will hurt both you and the customer.
“They can have any color they’d like – as long
as it’s black.” – Henry Ford.

7. Government Contracts ARE Negotiable
 Regardless of the impression your customer gives (even the
Government), EVERYTHING is negotiable.
 They want things. (…look good, retire in peace, etc.)
 You want things.
 What customer believes is a “must have” might be satisfied a different or better
way.
 Could you trade a little profit to
 be able to bill every two weeks?
 have better payment terms or encourage early payment with discounts?
 Is there another way to give a customer what he/she seems to insist
on?
 Alternate system generated backup reports
 Education on reporting vs. invoicing

8. CASH FLOW ENEMY #2
Non contractual customer billing
expectations and unofficial agreements

9. Does The Contract Really say…
 Often times, Government Contractors bill customers based on an
expressed wish that causes cash flow difficulty and was never
formally in the contract.
 The project team and others can believe that a requirement is in the
contract and never question the requirement.
 Examples Include:
 Requirement to have all costs for a given month in the invoice – no lagging costs
 Specific billing formats
 Excel invoice or invoice backup
 Check to see if the requirement is REALLY in the contract

10. CASH FLOW ENEMY #3
Inaccurate or incomplete setup of
the project in the accounting system

11. Importance of Project Setup
 Garbage in – Garbage Out
 Invest in project setup over project cleanup
 Project structures should support the following in this order
 Billing
 Revenue Recognition
 Project Reporting ( …there are alternate ways to achieve this end)

12. Areas of Potential Setup Failure
 Labor Categories and Labor Rates
 Project Workforce
 Separation of costs by CLIN/SLIN
 Direct and indirect costs ceilings
 Indirect Rate Caps
 Improperly structured or coded Purchase Orders
Each of these items have the potential
to cause delays due to needed
corrections.

13. CASH FLOW ENEMY #4
Poor Work Authorization

14. Why Does Work Authorization Matter?
 Work Authorization is a requirement of doing Federal business and
will eventually be audited by DCAA.
 Work Authorization gives the authority to incur cost and begin work.
 Work authorization happens on multiple levels
 Customer to contractors (to the contracts department)
 Contracts department to the Project Manager
 Project Manager to Task or Control Account Managers
 Management to Individual Employees
 Work Authorization documents should (at a minimum) communicate
 Scope of Work / Description of Work
 Schedule / Period of Performance
 Proper Charge Code

15. Impacts of Poor Work Authorization on
Invoicing
No Work Authorization Document or
Outdated
Employee Charges the Wrong Charge
Code
Labor Corrections Needed
Labor Corrections Must Be Processed
and Approved
Costs must be reprocessed and
Invoice Regenerated
This is the #1 most common billing delay.

16. CASH FLOW ENEMY #5
Vendor Payment Expenses /
Procurements

17. Areas of Potential Impacts from Procurements
 Improperly coded Purchase Orders
 Which in turn flow to costs being expensed against the project / CLIN, etc.
 Manually coded vendor or subcontractor invoices
 Manual allocations of subcontractor or vendor invoices
 Inability to integrate subcontractors into corporate time keeping
system
 Payment terms to subcontractors and vendors
 JIT approach on Fixed Price contracts

18. CASH FLOW ENEMY #6
Inadequate Project Cost Controls

19. Areas of Potential Cost Control Impacts
 Weekly or bi-weekly review of costs
 Proximity to CLIN/SLIN funding limitations
 Appropriate personnel charging the project
 Personnel charging time to the right project numbers
 Abnormal costs or cost surges
 Project Managers or approvers should NOT see their costs for the
first time when they are reviewing invoices.
 By this point, it’s too late to change anything without delaying the billing process.

20. CASH FLOW ENEMY #7
Lack of Billing Strategy

21. Billing Strategy
 The objective of each billing cycle should be to bill as much as
possible as soon as possible.
 The goal is not simply to bill all billable revenue recognized (T&M, CPXX), but to
bill it fast.
 Billing and Project Team Work Schedules
 Working Sunday and 12 hour days on billing week
 Ability to take off the second week after billing goals are met
 Bill the “big dollars” first
 Always prioritize higher revenue contracts over smaller ones for invoicing order.
 Get fixed price invoices out before others (may be “low hanging fruit)
 Monitor and report on the billing progress daily to executive management during
the first week of the billing cycle.

22. CASH FLOW ENEMY #8
Absence of a Collections Functions

23. GovCon Collections
 May be helpful to have a small, dedicated collections team
 Tracking the progress of payment
 Relationship with the Government payment office
 Ability to work with PMs to help walk invoices through the process
 Use of the Prompt Payment Act when necessary
 Forces customer accountability
 Time limit on notification to the contractor on errors.
 Relationships through the technical PM and the agency payment
offices are helpful.
 Reality: People help people that they like

24. CASH FLOW ENEMY #9
Poor Visibility Into the Invoicing
Process

25. Invoice Cycle Management System (ICMS)
 In order to manage this process, a work flow based system that:
 Allows invoices to be internally approved before being sent.
 Has work flow notifications as to the approval status
 Tracking of dates as to when invoices were generated, when they were sent,
and stage in the review process.
 Allows for daily reporting to executive level influencers during billing weeks
 Facilitates LEARNING each time an invoice has to be re-worked

26. Benefits of an ICMS
 Ability to monitor the time it takes to review and send invoices
 Ability to track the number of times invoices have to be corrected and the reason why
 Centralized repository of invoices and approval history
 Ability to sort and manage items based on status/stage
 Use of a web form to capture all data needed by billing staff
 Workflow notification of new items being added and changes in approval status
 Being able to know if the invoicing strategy of getting the big dollar invoices out first
is being followed
 Reporting by responsible PM, organization, etc. – INFUENCE BEHAVIOR
A solution can be built on something as simple as Microsoft SharePoint ®

27. CASH FLOW ENEMY #10
Financing Small Subs and Primes

28. Financing Small Subs and Primes
 Most Government Contracts are NOT in the banking industry YET
they loan money all the time
 Effectively they give interest free loans to some smaller subcontractors and
primes
 This unintentional financing happens by
 Continuing to pay subcontractors during funding gaps
 Better than normal payment terms (30, 45 days) – primes and subs
 Pay When Paid Terms
 Solutions are available that can shift the burden of financing by
recommending solutions to other contract participants
 Traditional Line of Credit (Access National Bank)
 Low interest rate invoice factoring (Republic Capital Access)

29. Contact Information:
Terrell Richmond, CEO
Eric McCamey, Managing Director
Terrell.Richmond@nymbuscorp.com
Eric.McCamey@nymbuscorp.com
Tel: 703.574.8181
1765 Greensboro Station Place
Suite 900
McLean, VA 22012
“Maximizing the GovCon Value Chain”