OTCPK:ERILF - Post by User
Comment by
poneon May 27, 2015 3:03pm
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Post# 23770674
RE:Growing A-R
RE:Growing A-RSteelironman wrote: Sometimes when construction companies have growing accounts receivables, the problem is not only in the tardiness of the payers, but in the actual acceptance of the invoices by the customer. Often extras are billed which increases revenues, but the extras have not been approved by the customer's engineer and consequently are not paid until they are approved. Its not unusual to see the final approved amounts subsequently substantially reduced. The ajustments are made at year end when auditors pick this up and they should review the validity of all the acounts receivable.
A second possibility for increases in average outstanding days in AR is due to holdbacks in contracts. The steel portions of contracts are completed early in a onstruction project and holdbacks are only released when the project is completed, sometimes more than a year later.
Thank you for actually discussing the issue instead of hurling insults like everyone else and pretending the issue doesn't exist.
So how do top-tier construction companies remediate this problem? Do they ask for larger prepayments? Do they break projects into smaller pieces? Do they make their milestone payments larger?
Can you explain what holdbacks are and when do they apply? From the 2014 report, it is clear that the trade receivables deteriorated at every level, independently of the holdbacks. Holdbacks are clearly documented as a separate line item within the AR.