How a Commercial Cleaning Company Cut Its Collections Cycle From 68 Days to 34

How a Commercial Cleaning Company Cut Its Collections Cycle From 68 Days to 34

This is an illustrative scenario, representative of the kind of receivables cleanup work described below. Details are anonymized and the figures are for illustration; results vary by business and are not guaranteed.

The company was profitable every single month and borrowed money to make payroll almost every single month. Both of those things were true at the same time, and the owner could not explain it.

That is the whole shape of a receivables problem. This representative accounts receivable collections case study follows a commercial cleaning company with roughly 2 million dollars in annual revenue that carried 68 days sales outstanding and treated a line of credit as working capital.

The Problem

Forty-some commercial accounts on net-30 terms. Office buildings, two medical groups, a handful of retail locations, one property management company that represented about a fifth of revenue.

The profit and loss looked healthy. The bank account did not. Every month the owner drew on the line of credit around the 25th, paid it back partially when a batch of checks landed, and drew again. The balance had not been below 60,000 dollars in two years, and the interest was quietly one of the larger line items on the income statement.

The owner's diagnosis was that customers paid slowly and there was nothing to be done about it, because these were good accounts and nobody wanted to antagonize a good account. That diagnosis was half right.

The Diagnosis

Three things surfaced once someone actually looked at the receivables in detail.

The first was that nobody produced an aging report. The bookkeeping software could generate one in a click, and no human being had ever opened it. There was no list of who owed what and for how long, which meant collections happened by memory, and memory prioritized whoever called to complain.

The second was invoicing lag. Work was completed at month end. Invoices went out around the 12th of the following month, because that was when the crew timesheets got compiled and reviewed. Net-30 terms starting on the 12th meant the clock started eleven days late on every single invoice. That lag alone accounted for a large share of the 68 days, and it was entirely self-inflicted.

The third was ownership. Collections belonged to nobody. The owner did it when cash got tight, which is the worst possible time to start a payment conversation, because it turns a routine follow-up into an obviously desperate one.

There was also a concentration finding that mattered more than the arithmetic. The property management client, a fifth of revenue, was also the slowest payer at close to 90 days. Aggregate DSO was being dragged by one relationship, and no one had connected those two facts because no one had looked at the receivable by customer.

The Approach

The work, representative of a receivables engagement, was sequenced deliberately rather than attempted all at once.

Invoicing moved first, because it was the cheapest fix with the largest effect. Timesheet review was decoupled from invoice generation. Recurring contract amounts, which were fixed and known in advance, went out on the first business day of the month. Only the variable extras waited for the timesheet review and went out as a separate line later. Eleven days of self-inflicted delay disappeared without a single conversation with a customer.

Then the aging report became a weekly ritual. Fifteen minutes, every Monday, working the 31-to-60 bucket rather than the 90-plus bucket, because an invoice at 38 days is a reminder and an invoice at 95 days is an argument.

Then ownership. One person, the office manager, was given collections as an explicit responsibility with a written escalation path: a reminder at day 35, a call at day 45, the owner involved at day 60. Having a defined ladder meant the early contacts could be genuinely friendly, which is the only reason they worked.

New contracts got new terms. A deposit for onboarding new locations, a stated late fee, and ACH as the default payment method rather than a check in the mail. Existing contracts were left alone until renewal, because renegotiating terms mid-contract with the customers you depend on is how you lose them.

The concentration issue got handled as a relationship conversation rather than a collections one. The property management company was not refusing to pay. Their internal approval process required a specific invoice format and a purchase order reference the cleaning company had never been asked for. Providing it moved that account from roughly 90 days to roughly 40.

The Outcome

In this representative scenario, days sales outstanding moved from 68 to 34 over about five months, and roughly half the line of credit balance was retired.

The honest accounting of where that came from matters more than the headline. Most of it was the invoicing change and the format fix on the largest account, both of which were process problems inside the company rather than customer behavior. Very little of it came from customers agreeing to pay faster, which is the thing owners usually assume has to happen.

An equally honest caveat: the result was available because the underlying situation was fixable. A business whose slow payment is genuinely driven by customer credit quality, or by an industry where 60-day terms are the norm, does not have this outcome available in the same way. Customer mix and contract terms drive most of the ceiling. Nothing here is a guaranteed result, and the arithmetic will look different in every business.

The durable change was not the DSO figure. It was that a receivables problem became visible weekly instead of becoming visible when the bank balance got scary.

Why Outside Help Mattered

The owner had the data the entire time. What was missing was someone whose job was to look at it on a schedule and turn it into a process, which is difficult when you are also running crews.

Purewater Financial is a New York accounting firm founded in 2020, with small business owners, venture-backed startups, real estate investors, and solopreneurs among its published client types. Work like this is ordinary for an accounting practice and genuinely hard for an owner-operator, because it requires consistency more than expertise.

The trade-off is worth stating plainly. Outside accounting help is a recurring cost, and it only produces this kind of result if the underlying data is being captured, meaning contracts, invoices, and payment records have to exist in one place. If your books are three months behind, the sequencing is cleanup first and process second.

Confirm scope, licensing, and fit before engaging. If you want to understand the report at the center of all of this before your next conversation, start with how to read an accounts receivable aging report, then compare firms by specialty and verified reviews in the Sam's List accountant directory.

Frequently Asked Questions

What is days sales outstanding, and what is a reasonable target? DSO is the average number of days it takes to collect a receivable, calculated as accounts receivable divided by revenue for a period, multiplied by the days in that period. There is no universal target. The useful comparison is against your own stated terms: if you bill net-30 and run at 68 days, the gap is the problem worth investigating.

Why would a profitable company need to borrow to make payroll? Because profit is an accrual concept and payroll is a cash event. Revenue recorded when the work is done can sit uncollected for two months while wages are paid every two weeks. The larger the receivable balance relative to monthly costs, the more likely a profitable business runs short of cash.

What is the fastest way to reduce a collections cycle? Usually invoicing speed and accuracy, because those are entirely within your control and require no customer negotiation. Invoicing eleven days after work is completed adds eleven days to every payment. After that, a weekly aging review focused on the 31-to-60 day bucket, and one named person responsible for follow-up.

Should I charge late fees on commercial accounts? A stated late fee in new contracts is common and gives follow-up conversations a reference point, though many businesses rarely enforce it. Adding fees to existing contracts mid-term is a different matter and can strain relationships you depend on. Enforceability varies by jurisdiction and contract language, so have terms reviewed before relying on them.

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About the author: Kimberly Green is the cofounder of Sam's List, where business owners and high earners find vetted CPAs, financial advisors, and fractional CFOs. She's met one-on-one with 400+ financial professionals and writes from the real data behind thousands of client-advisor matches. Ask her anything about finding an accountant - she's heard it all, including the questions people are afraid to ask.