In suggestion #1, I mentioned reducing debtor terms, which if customers comply, should reduce debtor days (DSO).

But it shounds than rather than just DSO, you're suggesting more focus on the period between the customer commissioning the sale (say a purchase order or similar) and the time the invoice is issued. This is a really good point, because clearly your debtor terms start from the time the invoice is received, but of course if that invoice is issued a month after delivery, then that would have a much more significant impact on cash than you'd realise.

So, this additional variable is likely based on when you recognise the sale, as you suggested, and then how long it takes after the sale is theoretically recognised for the customer to receive the invoice.

This may sound like it's getting a little pedantic, but I've seen companies issue invoices whenever someone remembers, which was usually long after delivery. In those cases, you DSO may look like 30 days but really be 60 days.

In terms of demanding payment upon delivery due to developments in technology, well, it may be okay for customers, but then once suppliers demand it, you could be in a worse position. Intuitively, I think it makes sense (maybe not immediately, but not 90 days either). Then again, payment terms really form part of you value proposition. Maybe if payment terms were revolutionised, we'd still return to current equilibriums through price adjustments. Maybe?

Then, there’s the cashflow predictability. Regardless of how good technology we have, exceptions happen, and we cannot predict the cashflows perfectly.
For example, we can pay our (personal) bills immediately. Yet, think how complicated your life would become if you were on a tight budget (to simulate little to no FCF in a company), your bills arrived randomly, and all were “pay tomorrow”. I think most people would be really frustrated rather quickly, and we would go back to “pay by” bills – regardless of the fact we have the technology for instant payments.

Significant improvements can be yielded from an electronically based, re-designed trade transaction process vs. that which can be achieved by utilizing technology to merely mechanize an paper-based process that is actually inefficient by current standards.

For example, in the case of both invoicing and payments, any business process to remit and receive payment is more efficient if it is embedded naturally within the physical custody transfer process than could otherwise be achieved by [the current practice of] executing multiple, standalone [often disconnected] business processes regarding a single trade transaction event.

Notwithstanding the resistance to change by people and longstanding practice.

In suggestion #1, I mentioned reducing debtor terms, which if customers comply, should reduce debtor days (DSO).

But it shounds than rather than just DSO, you’re suggesting more focus on the period between the customer commissioning the sale (say a purchase order or similar) and the time the invoice is issued. This is a really good point, because clearly your debtor terms start from the time the invoice is received, but of course if that invoice is issued a month after delivery, then that would have a much more significant impact on cash than you’d realise.

So, this additional variable is likely based on when you recognise the sale, as you suggested, and then how long it takes after the sale is theoretically recognised for the customer to receive the invoice.

This may sound like it’s getting a little pedantic, but I’ve seen companies issue invoices whenever someone remembers, which was usually long after delivery. In those cases, you DSO may look like 30 days but really be 60 days.

In terms of demanding payment upon delivery due to developments in technology, well, it may be okay for customers, but then once suppliers demand it, you could be in a worse position. Intuitively, I think it makes sense (maybe not immediately, but not 90 days either). Then again, payment terms really form part of you value proposition. Maybe if payment terms were revolutionised, we’d still return to current equilibriums through price adjustments. Maybe?

There are both real issues (you don’t really automatically approve invoices and pay them – it’s opening to huge fraud, and it may be operationally more efficient to do payments processing just once a month say), as well as behavioural from game theory (i.e. while it might make the sense to do it for all players, they would have to do it at once. If anyone does it on their own, they will be disadvantaged either by not earning the interest on cash at hand, or paying interest if they have to borrow to pay the invoice).

Not to mention that the revenue recognition is a whole bit can of worms (how do you recognize revenue for long-term contracts, say aircraft deliveries? Do you get payment on delivery? I dare say it would lead to bankruptcy of both Airbus and Boeing)

Afterall, we do live in an “information age” and we do utilize debit cards in retail transactions…so why can’t we begin to insist [contractually] on receiving payment in exchange for delivery? Maybe that wasn’t feasible in earlier times, but that was then and now is quite different.

After all, the sales event is the trading/exchange of service/product for cash between the parties.