DEO. It’s a Thing.
Bill Back for Project Expenses.

When it comes to cash flow, tracking Days Sales Outstanding and Days Payables Outstanding are well known calculations.  The shorter the better.

Companies that bill back expenses to their clients have another important measurement.

Days Expenses Outstanding.

This clock starts ticking when the first billable project expense is purchased. Keep in mind many transactions are made well in advance of when the actual project work is done, and can be large purchases such as airfare, hardware, software, and supplies – especially those purchased in bulk and billed back to various clients and projects.

Do the math.

• June
  Pay for upfront expenses – airline tickets and supplies.
• July
  Pay for expenses during the project – meals, hotel, entertainment – paid on the corporate card or reimburse  employees as they submit expense reports.
• August
  Project completes. Assemble the receipts, invoices, and other backup documents to bill back the project-related expenses. Send the bill in August if you’re lucky.
• September+
  Many of our clients report 90 days and even 120 before they receive payment from their customers.

There are several areas in the process that can reduce your DEO.

Start with how you’re managing the spending side. How well does your expense management process track billable expenses for your particular needs? Proper tracking here reduces the work needed on the back-end to determine who to bill and how much.  Take a look across systems too. Expense reporting is an obvious one but look at your invoice process as well.

Future blogs will address other areas.