What Slow AR Really Costs a Construction Business
Most construction and oilfield finance teams know their receivables run slow. Fewer have put a number on what that costs, and the number is usually bigger than expected, because it hides in three different places.
The short version: slow AR costs you in cash tied up on the balance sheet, the financing cost of carrying that cash, and the staff hours spent chasing it. Sizing all three is the first step to fixing it.
The cash trapped in receivables
Every day of DSO is roughly one day of revenue sitting in someone else's bank account. A firm doing $20 million a year carries about $55,000 of revenue per day, so moving from a 62-day DSO to a 52-day DSO frees roughly half a million dollars of cash. That is a one-time unlock, not a yearly saving, but it is real, and for a business running on a borrowing base it directly raises availability.
The cost of carrying it, and the staff time
If you finance operations on a revolver or borrowing base, as most industrial-services firms do, the cash trapped in AR is cash you are paying interest on. At a 10 percent cost of capital, every $500,000 freed is about $50,000 a year you stop paying the bank. That one recurs. Then there is the time: a team spending ten hours a week on collections is spending roughly a quarter of an AR salary just on follow-up.
General AR advice misses what makes industrial receivables hard: retainage that sits until a job closes, pay applications on the owner's schedule, lien-waiver exchanges, and change orders that move the invoice. Generic dunning tools do not speak that language, so they either annoy good customers or quietly do nothing.
Brae is an AI agent for accounts receivable, built for industrial services companies on QuickBooks Online, with Viewpoint Vista in development. It sizes the slow-AR problem and then works it, drafting prioritized follow-ups your team approves. A person approves every send.
Frequently asked questions
- How do you calculate the cost of slow accounts receivable?
- Estimate the extra cash tied up as (Excess DSO days) × (Annual revenue ÷ 365), then apply your borrowing rate or cost of capital to get the annual carrying cost. Add the hours your team spends on collections and the historical write-off rate on aged invoices for a fuller picture.
- What is the true cost of a late invoice?
- It compounds in three ways: financing cost while the balance sits, staff time to chase it, and rising probability of a write-off the older it gets. Aged receivables are statistically less collectible than current ones across most B2B contexts.
- Why do old invoices become harder to collect?
- Details fade, the original contacts move on, disputes surface late, and priority drops on the customer’s side. Follow-up that is consistent from day one prevents most of the aging that later becomes uncollectible.
- What is the cheapest way to reduce the cost of slow AR?
- Prioritized, consistent follow-up on the oldest and largest invoices. The cost is almost entirely time, and the return is real cash pulled forward on receivables you have already earned.
More on DSO & the Cash Cycle
DSO for Contractors: What's Normal, What's Good, How to Move It
What's a healthy DSO for a construction or oilfield contractor, and what actually moves it? A plain-language guide for finance teams.
From Baseline to Proof: Measuring the Cash a Change Actually Frees
Any AR change is only as good as what you can measure. Here's how to freeze a baseline and prove the cash a process or tool actually frees.
Oilfield-Services AR: Slow Pay, Big Tickets, Thin Teams
Oilfield-services receivables combine large invoices, field-ticket disputes, and slow-paying operators against thin back-office teams. Here's how to keep cash moving.
- Step 1
See the cash opportunity in your own numbers.
Estimate the working capital tied up in your receivables. These are founding-partner targets we design around — not guarantees.
- Step 2
Ready to work with us?
Building this with industry operators. Brae is partnering with a small group of industrial finance leaders to shape an AI agent for accounts receivable.