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Benchmarking Pay Benchmarking Air Products and Chemicals Lawrence Sports has had a difficult time of keeping cash flow where they want and need it, in order to secure
2: Review of Literature and Benchmarking Customers love and cherish companies that treat them the way they want to be treated. Sometimes customers will even pay more
also allow Riordan to reach a fair compliance level as it relates to their internal pay system by conducting benchmarking studies and administering pay surveys to
Lawrence Sports Benchmarking University of Phoenix Introduction Lawrence Sports, a manufacturer of sports equipment, is having cash flow problems. On one hand, it
of what the employees believe to be the biggest issues that need to be addressed. Benchmarking to improve pay scale competitiveness with other area companies is one
Submitted by SFTHAYER on April 4, 2008
Category: Business
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Benchmarking
Air Products and Chemicals
Lawrence Sports has had a difficult time of keeping cash flow where they want and need it, in order to secure a better interest rate. Cash flow from customers, accounts receivable play an enormous role in this equation and while times may be tight sometimes for customers and sales people will always request extra terms for a struggling customer, setting a minimum payment term schedule is essential to maintaining the financial health of your own company.
Benchmarking Air Products and Chemicals showed the importance of just a few days improvement of is accounts receivable average, tightening of its credit terms and working its accounts receivable down by eight days.
In the final quarter of 2004 the average days to payment was around 69 days. This was from the invoice date to the actual receipt of cash into their accounts. This was fairly consistent with other industrial gas supplier’s, Air Products felt they could do better in order to impact their bottom line even more. To improve this they started to employ direct debit of invoices, put a tighter noose of extending credit and sticking with standard terms or encouraging companies to take advantage of small discounts for early payment.
Moving forward to the second quarter of 2007, the company had reduced the “average days to payment” for the 69 to 61 days. While this in itself does not sound like it would impact the bottom line here are a few numbers to consider. For every single day of improvement the company increased their cash flow by $25 MILLION dollars, therefore freeing up an astounding $200 plus million dollars of working capital, just by having people concentrate on accounts receivable. Looking deeper into the over all benefit of the company this change yielded an improvement in the OROI of between .25-.50% or approximately 2-4% improved profit.
These numbers were also achieved as the credit was...
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