Quote to cash is where your working capital goes

Quote to cash is the run from a customer accepting your price to the money arriving in your bank. In most South African businesses that run takes days longer than the work itself, and the delay is administrative rather than financial. You are not short of cash. You are late issuing invoices.

The distinction decides what you buy. A funding gap gets solved with a facility, and you pay interest for the privilege. An admin gap gets solved once, for a fixed cost, and then stops. Both look identical on a bank statement, which is why so many businesses finance a problem they could have closed.

The stages, and where the days actually go

Quote to cash has six stages. The leaks are always at the joins, never inside a stage.

• Quote. Priced from a spreadsheet or from memory. Nothing links it to what the job will actually cost.
• Acceptance. Arrives by email or WhatsApp. Somebody has to notice it and tell operations.
• Delivery. The work happens. The job card, timesheet or delivery note is completed on site, on paper or in a separate system.
• Invoice. Somebody reads the job card and retypes it into the accounting package. This is where the days go.
• Collection. The invoice goes out, the customer's terms start counting from receipt, and any query resets the clock.
• Reconciliation. The payment lands and gets matched to the invoice, or does not, and sits in a suspense account.

The classic shape is a job that finished on a Thursday and was invoiced the following Wednesday. Nobody was slow. The job card had to reach the office, wait for the person who does invoicing, and get keyed in. On 30 day terms, six lost days is six days of your money sitting in somebody else's account, on every job, forever.

Why this is not a funding problem

Financing the gap works, and the ICT finance sector exists partly because of it. Andrew Keggie, chief information officer at Lula, argues in a piece about ICT finance for SMEs that of everything pressing on ICT SMEs, the payment gap is the most solvable. Demand is real, margins hold and the work is being won; what remains is the distance between winning it and being paid. Solvable is the right word. Financing is not the only way to solve it, and his sector is not the only one it applies to.

Run the arithmetic on your own business. Take your average invoice value, multiply by the number of invoices you raise in a month, and multiply that by the fraction of a month you are late issuing them. That figure is what you are currently funding with a facility, an overdraft or your own patience, and the interest on it is a recurring charge against a fixed problem.

Six days on a business invoicing R2 million a month is about R400 000 permanently out of reach. Borrowing it costs you every month. Closing the gap costs you once.

The second cost, which is worse

Late invoicing is visible and annoying. Not knowing what a job cost is neither, and it comes from exactly the same split.

Gavin Kelly, chief executive of the Road Freight Association, has warned that transport companies disappear overnight because their contracts and rates are unsustainable, as reported by Freight News. Whether a rate covers costs is answerable only if the cost of the job and the revenue from the job land in the same place. When job cards live in one system and the ledger in another, they never do.

Break-even analysis makes the point precisely. As SME South Africa sets out, your break-even point in rands is fixed costs divided by contribution margin ratio, where contribution margin is what is left of a sale once variable costs come off. Both inputs come from your own records. If variable cost per job is an estimate, break-even is an estimate, and every price you quote from it inherits the error.

That is how a business runs profitably in aggregate while losing money on a third of its work, and never finds out until the aggregate turns.

How to measure your own gap this week

The number is easy to get and almost nobody has it. Take the last ten jobs you completed. For each one, write down the date the work finished and the date the invoice was issued. Average the difference.

Then do it again for the date the invoice was issued against the date the money arrived. The first number is yours to fix. The second is your customers', and you can only negotiate it credibly once the first is small.

Most operators are surprised by the first number and have never seen it written down, because no system in the business holds both dates. That is the finding, not the arithmetic.

What actually closes it

Not a new accounting package. The joins, in order of what they cost you.

The job card that gets completed on site becomes the invoice, without retyping. The quote carries the same reference as the job and the invoice, so a query can be answered without three lookups. Costs land against the job as they are incurred, so contribution margin is a fact rather than an estimate. The ledger receives its numbers instead of being typed into.

This is the ordinary shape of a Zorah discovery audit: find the join that is costing the most days, fix that one workflow properly, then connect the rest to it. The point is not modern software. It is that six days becomes one, and one is worth measurably more than a facility priced at prime plus.

What to do on Monday

Pick the single job you finished most recently. Find its job card, find its invoice, and note both dates. If they are more than 48 hours apart, work out why, in that specific case, before you generalise.

The reason will be a person waiting for a piece of paper. It nearly always is.