Imagine the result

Cash Flow

Imagine the result

Imagine the result

Gross Revenue

Net Revenue

Effective Multiplier

Financial Billability

Operating Income (Income after Corporate Overhead)

Return on Net Revenue (Income percent of net revenue)

Bookings

Backlog

DRO (Days Revenue Outstanding)

Key Financial Metrics

Imagine the result

Why Does Cash Flow

Matter?

• 90% of AUS’s total tangible assets are cash & receivables making DRO the key balance sheet metric

• Allows us to fund investments, make acquisitions and invest in growth

• Key measurement of our financial health to clients, business partners, and shareholders.

Imagine the result

Cash Management Cycle

Client Go/No Go

Opportunity Go/No Go

Proposal

Contract

Project Execution

Invoicing

Collections

Closeout

Imagine the result

Credit Review• The credit review is a key element of the

client approval process.

• Typically requires a 24 hour turnaround

• Coordinated through credit and collections managers with their available resources

• D&Bs/D&B Alert Program (Existing Clients)

• Credit Applications• SEC search – Annual Reports, 10Ks, 10Qs• Public Records• Internet• Moody• Existing clients internal payment history

Imagine the result

The Go / No-Go Decision

For Non-Public Companies:

• Review payment history and financial condition with finance

• Detailed review of D&B report – PAYDEX Score

• Negotiate high multipliers, push for retainers, especially for new or Non-tier clients.

Imagine the result

The D&B ReportWhat’s in it?• History• Operations• Public Filings - UCC Filings – collateral agreements• Suits, Judgments , Liens – bankruptcy records• Paydex – 3/12 month score – how vendors are being paid• Company Financials – balance sheet, P&L, trend analysis,

financial ratios, statement of cash flow, etc.• Special Events – work force changes, natural disaster's,

earnings updates, ownership changes, stock/bond issuance/redemptions

• The Credit Rating – Tangible net worth combined with key credit factors (1-4)

Imagine the result

What’s an FSS? Financial Stress Score from D&B• Lowest risk 1 – highest risk 5• Score of 1 indicates a failure rate (bankruptcy) of 1.2% or

120 per 10,000 companies• Represents risk of severe financial stress over the next

12 months• Model uses statistics from D&B files to predict

deterioration including but not limited to;• Trade payments• Balance Sheet/P&L• Operational/ownership changes• Relationships to other firms’ in same industry and all firms in

database• Industry, size, years in business, etc.

Imagine the result

What’s an CCSC? Commercial Credit Score Class from D&B

• Lowest risk 1 – Highest risk 5

• Predicts likelihood of a firm paying in a severely delinquent manner (90+ days past terms) over the next 12 months

• Based upon a statistically valid model and the most recent payment information in D&Bs files

• Uses some of the same criteria as the FSS but more emphasis on payment statistics

Imagine the result

During Contract

Negotiations…

• Educate the client on our process, terms

• Ensure contract spells out all invoicing requirements

• Understand and document client’s schedule for invoicing

• Request Retainer – if possible• With private sector clients – know your

state’s lien right requirements• Develop a cash flow model to look at

timing of cash and cost on lump sum projects

• Negotiate favorable payment milestones

Imagine the result

During Contract

Negotiations Avoid

• Payment terms outside of 30 days

• Discounts for prompt payments

• Retainage if possible – may not be

• Unfavorable milestone billing requirements

• Volume Discounts

• Credit Card payments, whenever possible

• Subcontractor not on pay-when-paid terms

Imagine the resultImagine the result

Unbilled AR

Imagine the result

Unbilled Revenue

• Definition

• Unbilled Revenue = JTD Revenue – JTD Billings

• Goal: No Balance over 45 Days

• In a perfect world there should never be any Unbilled over 45 Days

• 0-30 Days is the current month (Labor posted in open account period)

• 31-60 Days is the prior month (Labor posted in prior account period) – should be billed by day 45

• Any Unbilled > 45 days at this point has a story OR is potentially at risk of not being billed.

Imagine the result

Unbilled Monitoring

ActivitiesWork with PM

• Weekly UB Reports available

• “Who charged my project this week” is a very useful tool in managing unbilled.

• If UB is not billable –write down the revenue as soon as possible

• Monitoring Unbilled can and should be part of all project reviews

Imagine the resultImagine the result

Accounts Receivable(Billed AR)

Imagine the result

Accounts Receivable

• Definition: All amounts billed to clients, but unpaid.

• Strive toward industry best in class of 45 days or less.

• Days outstanding is a critical element of project management – measure of quality and client satisfaction.

• We need to be proactive in our monitoring – don’t be afraid to ask!

Imagine the result

Accounts Receivable Monitoring

Activities

• 15 Day Call Criteria – All invoices greater than $10,000 posted to our accounting systems 15 days prior.

• Call is an opportunity to contact the client and verify that the invoice was received. This is NOT a Collection Call, it is a courtesy call. Used to identify potential invoice processing delays.

• There are a number of ways to verify receipt of invoice:• PM can delegate to Project Assistant to verify.• PM can request the Invoice Specialist

confirm receipt.• Credit and collections team can contact

Client to confirm• Email confirmation that the invoice was

delivered.

Imagine the result

Accounts Receivable Monitoring Activities –

Con’t.

• Revenue detailed exceptions report (i.e. balance 90+ days and greater than $10K)

• Incorporate discussion of accounts receivable into project reviews and/or monthly financial meetings

• Continue follow-up with clients, especially when greater than 60 days

Imagine the resultImagine the result

DRO and Interest Calculation

Imagine the result

Income Statement -

Expense Items

A/R Interest

• Finance charge based on project DRO; 10% in excess of 91 days; credit of 10% if lower than 75 days

• The business unit interest charge is the total of the projects in the business unit

Accounts Receivable +Unbilled Revenue

Average Revenue Past 91 daysDRO =

Imagine the result

Days Revenue Outstanding CalculationPrevious Period AR/UB:BILLED AR $ 20,767 UNBILLED AR $ 19,659TOTAL UB/AR $ 40,427

If DRO < 75 Days:

Interest Calculation

51 – 75 = (24) days

Interest rate (month)10%(APR)/(12 months) = 0.8333%

(24) days * $790 = ($18,983)Revenue Earned Under 65 days

Interest: Charge/(Credit)($ 18,983) * 0.833% = ($158)

Average Revenue per Day = Last 3 mo Gross Revenue/91 days$71,978/91=$790 Avg Rev/Day

DRO = TOTAL UB AND AR $ 40,427/Avg Rev per Day $790 = 51 DAYS

If DRO > 91 Days:

11 days * $790 = $8,700

Revenue Earned Over 91 days

Interest: Charge/(Credit)$ 8,700 * 0.833% = $72

102 – 91 = 11 days

Imagine the resultImagine the result

CREDIT IS A PRIVILEGE ANDNOT A RIGHT

Economic conditions and a firm’s credit policy are the primary drivers of the level/aging of

accounts receivable

Imagine the result

Imagine the result

Remember Positive Cash Flow is the #1 sign of a healthy business