Masonry Magazine October 1987 Page. 30
Did You Say The Check Is In The Mail?
Construction companies experience the worst delays in accounts receivable of nine industries examined in a recent study by the National Association of Business Management, Inc.
By computing the average number of "sales days" that are tied up in receivables, NABM concludes that 64% of construction companies have accounts receivable tied up for 46 or more sales days. (A sales day is determined by taking the company's average daily sales volume and dividing by the average amount of accounts receivable.)
By comparison, all industries report an average of only 42% with accounts receivable tied up for similar periods.
The study, entitled "Trends in Accounts Receivable," was based on a survey of 1,500 respondents. Companies that responded represent a broad range of industry and size groups.
The report notes that overdue accounts receivable have a significant impact on profitability, since the business owner is forced to expend additional funds for collection or for borrowing to finance operations.
Other highlights of the report:
About 75% of construction companies report that their credit terms are listed as "full payment expected within 30 days of billing."
Construction companies are split on the issue of service charges for late payment. Forty-nine percent say they don't charge; 48% do. Among those who charge, only 50% say the charges are "strictly enforced."
When asked to identify their greatest accounts receivable problem,
OUTSTANDING ACCOUNTS RECEIVABLE
Comparison of days sales outstanding, all Industries vs. construction Industry.
Days Sales Outstanding | Average, All Industries | Construction Industry
:----------------------|:-----------------------|:----------------------
1-7 | 0.5% | 0.0%
8-14 | 1.4% | 0.0%
15-21 | 4.6% | 2.8%
22-30 | 7.7% | 2.8%
31-45 | 43.1% | 30.6%
46-60 | 33.4% | 52.8%
over 60 days | 8.4% | 11.1%
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