In the construction industry, time is money - especially when it comes to your order-to-cash cycle. The faster you can move from completing billable work to receiving payment, the healthier your cash flow, and the more capital you can free up for growth. While most CFOs focus on cutting costs through labor and resource efficiencies, the real icing on the cake comes from the hard savings available by shortening your order-to-cash cycle.
At Vitruvi, we understand the cascading effects that come from tightening and streamlining your billing verification processes. By sending out invoices faster and reducing your Days Sales Outstanding (DSO), you’re not just speeding up payments - you’re actively improving your company’s bottom line by lowering the cost of working capital.
The Hidden Savings in a Shorter Order-to-Cash Cycle
In addition to the substantial efficiency savings gained from reducing labor, there are considerable, hard-savings available to CFOs by shortening the order-to-cash cycle. As the process tightens up, you reduce the amount of money tied up in working capital. That’s extra liquidity you can use to invest, grow, or cut financing costs.
Two Key Areas for Improvement:
1. Reducing Unbilled Work (Lowering Days Sales Unbilled - DSU)
One of the biggest opportunities for improvement lies in your Days Sales Unbilled (DSU) - the time between completing billable work and issuing the invoice. The sooner work can be verified and confirmed as complete, the sooner it can be invoiced and recognized as revenue. Reducing DSU means less work-in-progress sitting on your books, waiting to be turned into cash.
2. Reducing Receivables (Lowering Days Sales Outstanding - DSO)
Days Sales Outstanding (DSO) refers to the time it takes for your customers to pay after receiving an invoice. The more confidence they have in the accuracy and verification of your invoices, the sooner they’ll pay. Often, payment delays occur not because of customer unwillingness, but due to inefficiencies in the acceptance and verification of invoices. When you tighten your processes, you shorten DSO and get paid faster.
Working Capital Matters
Construction companies typically operate with a Weighted Average Cost of Capital (WACC) of around 7-8%. That means every day that cash is tied up in unbilled work or delayed receivables costs your business money.
Let’s put it into perspective: for a company generating $100 million in revenue. A 10-day improvement in DSU or DSO translates to annual savings of over $200,000. That’s real money - savings that go directly to your bottom line.
How Vitruvi Helps Shorten the Cycle
By digitizing your order-to-cash process with Vitruvi’s construction management platform, you gain real-time insights into every phase of your project. Our platform ensures that work is accurately tracked, verified, and invoiced as quickly as possible, minimizing both DSU and DSO. The result? You’ll get paid sooner, reduce the amount of cash tied up in working capital, and ultimately lower your financing costs.
This acceleration doesn’t just improve cash flow; it increases profitability. In a competitive industry like construction, those additional savings could be the difference between hitting your targets or missing them.
The Bottom Line
Shortening your order-to-cash cycle is one of the most powerful levers you have to unlock hidden savings and improve your company’s financial health. By focusing on reducing DSU and DSO, and ensuring faster, more accurate billing, you can free up working capital and realize substantial cost savings.
With Vitruvi, the benefits of digital transformation go far beyond labor and resource savings. The real payoff comes when you see how quickly, and how easily you can get paid.
