AR Period Reduction/Situation

The situation Big Box Distribution considers to be a problem is an average accounts receivable period which is considered unacceptable as it is costing them money. There is a also a video for this insight which is a component of the Effective Problem Solving Course.

The situation Big Box Distribution considers to be a problem is an average accounts receivable period which is considered unacceptable as it is costing them money. There is a also a video for this insight which is a component of the Effective Problem Solving Course.
As a result of a sale the customer places an order. The order results in a shipment to the customer which is followed by an invoice. The invoice becomes part of accounts receivable which the customer is expected to pay within 30 days.
The current average accounts receivable period is longer than desired, on the order of 53 days and management believes they are loosing money carrying the costs and want the period reduced to 51 days.
Management issued an ultimatum to the AR department to reduce the average period and when they didn't they were sacked. The new AR department has been issued the same ultimatum to reduce the average AR period to 51 days or else.

View the model in Insight Maker