You are the Treasurer of a mid-sized, $120MM a year in revenue company. The company is in a cash crisis. Your credit bank has informed you that no further borrowing will be provided until things get better with the company. There is no immediate way to get cash than through collection of receivables. Your vendors are pressuring you for faster payment because you have become a slow payer. DSO is running at 120 days. The industry standard is 55 days.

In a meeting with senior management, you recommend to the CFO and CEO it is necessary to force collections of receivables to 90 days with eventual goal to be 60 days for DSO. Sales management argues that restricting customer credit to 90 days is strangling the ability to sell product.

How do you represent your need to reduce the DSO? How much cash does 30 days or 60 days of reduction mean to the company? Be specific, do the math!