Customer Financing Trap

Composite / composite / Immediate

What it detects

Revenue is growing while the Collections Deterioration check is firing because DSO is elevated or worsening, so the company is effectively financing its own clients' cash cycles.

When it fires

Collections Deterioration (S4) + revenue growth > [redacted]% YoY

Why it matters

Growing revenue that sits in AR for [redacted]+ days is not the same as growing revenue in your bank account. The business is borrowing from its own future cash to fund current clients.

What it looks like in practice

A consulting firm signs three new clients in Q[redacted] each on Net [redacted] terms. Revenue jumps [redacted]%, but AR jumps [redacted]%. Cash in the bank is flat or declining. The P&L looks great. The bank statement tells the real story.

Severity levels

• HIGH

Thresholds

Exact thresholds, formulas, and severity bands are omitted from this public view. The full methodology, with every figure, is available in the authenticated app.

How it connects

The top client ([redacted] outstanding on [redacted] terms) is the primary driver.

Why these together

Collections Deterioration says the collections check is active because DSO is elevated or worsening, and revenue growth on its own looks like good news. Read together they say the growth is being funded by the company's own working capital: the new revenue is sitting in receivables instead of arriving as cash, so the business is financing its clients' cash cycles. The composite fires when Collections Deterioration is active and year-over-year revenue growth clears the growth gate; it introduces no threshold of its own.

Built from these checks

• Collections Deterioration: the receivables read. It establishes that DSO is elevated or worsening, the half of the pattern that turns growth into unpaid invoices; the revenue-growth half comes from the company's own books, not from a signal.

Sources

• ReadyRatios / SEC filings data via Collections Deterioration
• APQC via Collections Deterioration
• Beaver, W.H. (1966) via Collections Deterioration

SEE IT ON REAL NUMBERS

The exact thresholds, the formula, and your own figures are in the authenticated app. See it against a real, simulated dataset for Integra Executive Services, our public demo company, or connect your own QuickBooks Online account.