Latest / Cash Flow Conversations with Fexingo: Working Capital, Receivables, and Small Business Finance / How a Roofing Company Cut Days Sales Outstanding in Half
Transcript
- Lucas: So Luna, I was talking to a roofing contractor outside Austin last week, and he told me something that stopped me cold. He said his days sales outstanding — the time between sending an invoice and actually getting paid — was sixty-two days. Luna: Sixty-two days? That means he's financing his customers for two months. How is he still in business? Lucas: That was exactly my reaction. But here's the thing: he's a mid-sized player, roughly eight million in annual revenue, and he was just living with it. He thought that's how construction works. You do the job, you wait, you hope. Luna: So what changed? Did he win the lottery? Lucas: Not quite. He got hit with a perfect storm. A big commercial job paid late, a supplier tightened terms, and suddenly he couldn't make payroll. That's what forced him to look at his receivables with fresh eyes. Luna: Painful but often the catalyst. So what did he actually do? Because I imagine you can't just tell general contractors to pay faster. Lucas: Right, and that's where it gets interesting. He didn't renegotiate his contracts — those were set. Instead, he overhauled his invoicing process. First, he switched from paper invoices to a cloud-based system that sends invoices the day the work is done. No more waiting for the office to type it up. Luna: Okay, that's a start. But the invoice still has net thirty terms, right? Lucas: He kept the terms but changed how he billed. Instead of one lump sum at the end, he introduced progress billing. For a typical roof replacement, that means a thirty percent deposit upfront, then milestones: materials delivered, tear-off complete, final inspection. Luna: So he's getting cash in the door earlier. Did the GCs push back? Lucas: Some did, but he framed it as reducing risk for both sides. He's a smaller sub, so asking for a deposit is pretty standard in this industry. He also sweetened the pot by offering a two percent discount for payment within ten days. That got about half his clients to pay early. Luna: Two percent for ten days is pretty generous. But if it cuts your DSO by half, it's probably worth it. Lucas: Exactly. And the numbers bear that out. His DSO dropped from sixty-two days to thirty-one. He also set up automatic reminders — a friendly email at day five, a call at day ten, and a more formal letter at day fifteen. That alone cut his overdue accounts by seventy percent. Luna: Seventy percent overdue reduction just from reminders? That seems almost too easy. Lucas: It does, but the key was consistency. Before, he'd chase invoices when he remembered, which was usually after thirty days. Now it's systematic. And the reminders are polite but firm — they reference the invoice number, the due date, and a link to pay online. That removes friction. Luna: So he's not just nagging, he's making it easier to pay. What about the weather? Roofing is so weather-dependent, I imagine delays can mess with your cash flow forecasts. Lucas: That's a huge point. He had a job that was supposed to take two weeks, but a stretch of rain pushed it to five. With progress billing, he had already collected the deposit and the materials payment, so he wasn't carrying the full cost of the delay. Before, he would have financed that entire job for two months. Luna: That's a great example of how progress billing protects you from things outside your control. Lucas: And he told me something else that stuck with me. He said, 'I used to think getting paid was just a matter of doing good work.' But now he realizes it's a process you have to manage. He now reviews his receivables every Monday morning. He knows exactly who owes him what and how long it's been outstanding. Luna: That weekly review is such a simple habit. Most business owners only look at receivables when they need cash. Lucas: And that's when it's too late. Look, Luna, I have to share something that's been on my mind. We're able to make these episodes because of a small group of listeners who chip in monthly through buy me a coffee dot com slash fexingo. It keeps the show ad-free, and it's what allows us to do this deep-dive stuff. Luna: Yeah, and honestly, it's a pretty small group, but it makes a huge difference. It means we don't have to chase advertisers or sponsor segments that pull us off topic. Lucas: Exactly. So if these conversations have helped you think differently about your numbers, that's a low-key way to keep it going. No pressure either way — we're just grateful you're listening. Luna: Well said. So back to that roofing guy — what's the biggest lesson you think other service businesses can take from his story? Lucas: I think it's the shift from being a passive recipient of payments to an active manager of your cash cycle. He started with deposits, then progress billing, then systematic follow-ups. Each one shaved a week or two off his DSO. Combined, they cut it in half. Luna: It's like a compounding effect. And the fact that he didn't have to alienate any clients is pretty remarkable. Lucas: Right, that's the key. He said the early payment discount actually improved relationships because some GCs loved getting the discount. It became a win-win. He also stopped working with two clients who habitually paid at ninety days. That was a hard call, but he replaced them with better-paying ones. Luna: Sometimes you have to fire your worst customers. So what's the one thing you'd tell a business owner who wants to tackle their DSO but doesn't know where to start? Lucas: Start with the data. Pull your last twelve months of invoices and see who pays late and by how much. Then pick one change — maybe it's a deposit, maybe it's a reminder system — and implement it for a quarter. Measure the impact, then iterate. You don't need to do everything at once. Luna: And if you're a service business, that change could be the difference between barely scraping by and having a cushion. Thanks for sharing that story, Lucas. Lucas: Sure thing. I'd love to hear from anyone who tries this — shoot us a note, and we might feature your story in a future episode. Until next time, keep your cash flowing.