Taking Measure: Treasurers' Use of Performance Metrics Rises

One of the projects on the to-do list of Beth Williams, vice president of finance at Norwood Promotional Products, is measuring the amount of time that elapses from the moment Norwood receives an invoice until it's paid. Driving her actions is a desire to more accurately forecast cash and boost Norwood's ability to take advantage of early payment terms. The company, an Indianapolis-based provider of promotional products, currently uses about 60 percent of the discounts available on the 60,000 invoices it pays each year. Capturing the other discounts, which usually offer 1 or 2 percent off for payment within 15 or 20 days, will have a clear bottom-line impact.

Once Williams has measured the time used to get invoices into the system, her next task will be to pinpoint and eliminate (or at least reduce) the causes of any delays. Her theory is that paper invoices are held up when managers with approval authority are on the road. After all, invoices that are received electronically and don't require approval are quickly processed; only paper invoices tend to get stalled. If Williams's theory is on target, her next step will be to work with the operating units to develop procedures so that all invoices continue moving through the system even when managers are out of town.

Williams's goal is to measure and improve the process by midsummer, when production ramps up heading into the holiday season. "Cash tightens then, so we want greater visibility into the payables queue," she says.