Case Study: Receivable Recovery Programme for a B2B Services Firm
Reducing a 78-day collection cycle and addressing Rs 72 lakh of overeceivables
Executive Mandate Summary
Key Transaction & Governance Challenges
- •The firm's contractual credit period was 30 days, while its actual average collection period had reached 78 days.
- •Rs 72 lakh of receivables was more than 90 days overdue.
- •Overdue invoices did not have a single cause. Some clients were creditworthy but slow-paying, others were stuck in internal approval processes, while some balances were unlikely to be recovered.
- •The collection gap required the firm to fund client working capital through its own cash reserves and overdraft facility.
Northrop Execution Architecture & Methodology
Section 1 — The Central Issue
The firm extended 30-day credit but collected in an average of 78 days. This effectively meant that clients were receiving approximately 48 additional days of working-capital support.
The business had Rs 1.8 crore in receivables against Rs 5 crore of annual billings. Rs 72 lakh was older than 90 days, including Rs 28 lakh assessed as practically irrecoverable.
Section 2 — The Working Capital Cost
The collection delay created a cash deficit because salaries, rent, technology and compliance costs continued to be paid monthly.
The firm maintained an overdraft facility to bridge the gap, costing approximately Rs 12 lakh per year in interest.
Section 3 — Receivable Segmentation
Northrop aged the entire receivable book by client, invoice, contractual due date and actual overdue days.
The objective was to distinguish receivables that required collection pressure from those requiring process correction or formal provisioning.
Section 4 — Three Different Problems
The analysis showed that overdue receivables fell into three materially different categories.
Rs 45 lakh related to creditworthy clients paying on their own cycles. Rs 44 lakh was trapped in client approval processes. Rs 91 lakh related to clients unlikely to pay Including Rs 28 lakh assessed as practically irrecoverable.
Treating all three categories with the same email-reminder process was therefore ineffective.
Verifiable Institutional Outcomes & Value Realized
- 78 days → 52 days
- Rs 38 lakh collected within 60 days of implementing the invoicing changes.
- Rs 12 lakh of Pattern 1 receivables accelerated through the prompt-payment discount.
- Rs 85 lakh → Rs 40 lakh
Ashish Chaudhary
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