BUS 799 Module 4 assignment: capstone current-state analysis and findings, a full sample

Twelve Days Before We Even Ask: Current-State Findings on Where Keystone's Receivable Days Come From

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Master of Business Administration Program, Aspen University

BUS 799: Graduate Capstone

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Month Day, Year

Twelve Days Before We Even Ask: Current-State Findings on Where Keystone's Receivable Days Come From

This section reports the current-state analysis for the capstone at Keystone Electric, where the owners want receivables cut from 71 days of sales to 50. Following the methodology, it presents the decomposition of days by stage, the results of coding the causes of 80 late invoices, differences among general contractors, and themes from twelve interviews, and then classifies causes by whether Keystone can control them.

Where the Days Go

The revenue-weighted decomposition of 1,146 payment applications reconciled to within 1.5 days of the measured 71. Table 1 shows the result.

What the Decomposition Shows

The most striking finding is that 12 days pass, on average, between the end of a billing period and the submission of Keystone's payment application. Before any customer has a chance to be slow, Keystone has already given away 12 days. Payment after approval, at 22 days, is the largest component, but it reflects general contractors' payment terms and their own receipt of funds from project owners, which Keystone cannot directly change. Retainage accounts for 12 days, because retainage from completed projects often remains unpaid for months while closeout documents are gathered. Rejections and unsigned change orders together add 7 days.

Causes of Late Invoices

The author and the controller independently coded the primary cause of delay for 80 applications paid more than 60 days after the billing period ended. Agreement was substantial, with a kappa of 0.78 after the categories were refined in the pilot, above the 0.70 threshold set in advance (Cohen, 1960). The coded causes, from most to least frequent, were missing lien waivers or backup documents, 24 invoices or 30 percent; late submission, 19 or about 24 percent; unsigned change orders, 14 or about 18 percent; the general contractor awaiting payment from the owner, 11 or about 14 percent; retainage held, 6; arithmetic or format errors, 4; and disputed quantities, 2. The first three causes, all arising in Keystone's own processes, account for 57 invoices, or 71 percent of the sample.

Differences Among General Contractors

Days outstanding varied by customer. The general contractor that accounts for 38 percent of Keystone's revenue averaged 84 days, while the second largest, at 22 percent of revenue, averaged 62. Rejections for missing lien waivers were concentrated with the largest customer, which requires conditional waivers from every lower-tier supplier with each application. This suggests that a checklist tailored to that customer's requirements could remove a large share of rejections.

What People Said

Thematic analysis of the twelve interviews produced four themes (Braun & Clarke, 2006). First, billing competes with field work: project managers described preparing payment applications in the evenings after site duties, often days after the period ended. Second, no one owns the deadline: there is no firm cutoff date, and billing staff wait for project managers' quantities. Third, paperwork arrives late: lien waivers from suppliers and lower-tier subcontractors are requested only when the application is being assembled. Fourth, change work starts on a handshake: field crews begin extra work on verbal direction, and the signed change order follows weeks later, if at all. One general contractor's accounts payable specialist added that complete applications are approved in the first review batch, while incomplete ones wait for the next cycle, often two weeks later.

Retainage in Detail

Retainage deserves separate attention because it behaves differently from progress billing. At the end of the period studied, Keystone held about $1.25 million in retainage receivables, equal to roughly 12 days of revenue. About 40 percent of that balance belonged to projects that had been substantially complete for more than 90 days. The records show why: final retainage is released only after closeout documents are delivered, including as-built drawings, warranties, operation manuals, and final lien waivers, and Keystone typically begins assembling these after the last day of field work. On two projects, retainage remained unpaid for more than six months because a single warranty letter from an equipment supplier was missing.

Which Causes Keystone Controls

The findings sort into three groups. Controllable: billing lag, missing documents that lead to rejection, and unsigned change orders, together worth about 19 days. Partly controllable: review time, which falls when applications arrive complete and on the general contractor's schedule, and retainage, which can be released sooner if closeout documents are prepared during the project rather than after it. Largely outside Keystone's control: payment after approval, which depends on contract terms and on owners paying general contractors. This pattern is consistent with the survey finding that construction payment problems stem partly from process shortcomings and disputes and partly from the financial position of other parties (Ramachandra & Rotimi, 2015).

Limitations of the Findings

These findings have limits. The period studied included two unusually large hospital projects, which may overstate the influence of the largest general contractor. The cause coding assigned only a primary cause to each late invoice, although several invoices had more than one problem. Interviews with accounts payable staff at only two general contractors cannot show how every customer reviews applications. And the decomposition measures averages; individual projects vary widely. None of these limits changes the central conclusion, but they argue for testing recommendations on pilot projects before applying them company-wide.

Conclusion

Keystone's 71 days are not mainly a customer problem. About 19 days arise from its own billing lag, incomplete documentation, and unsigned change orders, and several more could be recovered through faster closeout and complete submissions. The next module develops a change and stakeholder plan to address these causes, focused first on the largest customer and on a firm billing cutoff. The owners reviewed these findings in a one-hour meeting and agreed that the billing cutoff and document checklist should be piloted first.

References

Braun, V., & Clarke, V. (2006). Using thematic analysis in psychology. Qualitative Research in Psychology, 3(2), 77-101. https://doi.org/10.1191/1478088706qp063oa

Cohen, J. (1960). A coefficient of agreement for nominal scales. Educational and Psychological Measurement, 20(1), 37-46. https://doi.org/10.1177/001316446002000104

Ramachandra, T., & Rotimi, J. O. B. (2015). Causes of payment problems in the New Zealand construction industry. Construction Economics and Building, 15(1), 43-55. https://doi.org/10.5130/ajceb.v15i1.4214