SPAs: The Hidden Source of Cash

The SPA Collection Lag is a Huge Hidden Account Receivable 

Allen Ray and I were talking a couple of weeks ago on a Go-To-Meeting session. Allen kept asserting that the cash tied up in SPAs was pretty big. Of course we knew that already from the study we did a few years back with IDEA. 

So I decided to flop it up in a spreadsheet and calculate it together. Here's what we came up with:

In this first example, a $100 million distributor with 30% of their business in SPAs at an average 40% discount from book would have uncollected SPA balances of over $3.3 million dollars. Ow. That's if the distributor is claiming manually.

If they claimed using EDI (assuming product database is cleaned up and SPA price notifications are received and load via EDI accurately)... and the distributor worked it out with the manufacturers to credit on Monday following the Friday they submitted claims... they would generate over $3 million in cash. Take a look... it's real. Worth putting someone on the case?

Example copyright Neil Gillespie and Allen Ray, 2010

In this example, the distributor might have a lot of State and local government business with 50% off book, and 50% of their sales in SPA business. This is a LOT of money, folks. Double Ow.

 

 

Example copyright Neil Gillespie and Allen Ray, 2010

Question is... how much would you spend to get your SPAs on EDI claiming? $$50 grand? What?

We'll keep this up on a tab so you can look at it again and again if you don't believe it.