In Part 1 and Part 2 of our benchmarking blog series, we introduced benchmarking and provided examples of key benchmark findings for staffing companies. Based on these findings, we identified specific problems for the companies to solve. This blog provides some hypothetical solutions stated below.

Solutions

Based on benchmark analysis, we find that all companies had the ability to meet their short-term obligations and utilize their current assets efficiently and properly. Some KPI/metrics indicate red flags in areas that need to improve.

• Current Liabilities to Net Worth. None of the four companies can use equities to pay off current liabilities due in a year with a ratio above 1. This affects the company’s ability to borrow, since current liabilities to net worth is a key ratio that banks use to evaluate risk. In order to improve financing ability, companies should try to pay off vendors earlier and generate more profits down the road. 

• Days Accounts Receivable or Days sales outstanding (DSO). In order to speed up the collection of accounts receivable, companies should consider the following: first, standardize procedures for product or service quotation and order management; second, get electronic invoices out fast; third, outsource collections; fourth, adjust credit terms based on customer history.

• Working Capital Turnover. Four companies didn’t manage their working capital efficiently to support revenue. Ways to help improve can be: first, shorten operating cycles; second, cut unnecessary expenses; third, reduce bad debt; fourth, generate more revenue; fifth, balance cash reserves against accounts payable.

Our Client Accounting & Advisory Services (CAAS) team is helping businesses of all sizes gain a competitive advantage by focusing on specific practices and operations that are centered around your needs and goals. We offer insight and support to help you make critical business decisions that lead to improved profitability. If you have any questions about benchmarking in your industry, please leave a comment below or feel free to contact me directly. I’m happy to help!