Many are familiar with the phrase cash is king, but often dont fully appreciate why that is so. Its not really a great surprise because the modern corporate organization is largely built around profit and loss. Managers are held accountable for increasing sales and improving efficiency of output. There is almost always an out-sized focus on driving costs down. And, its quite popular to describe a business as sales-driven or one where the customer comes first. There is nothing at all wrong with focusing on sales growth, cost reduction and improved customer service. But, it takes liquidity to keep the lights on, invest in R&D and new equipment. Without enough liquidity, organizations may have to suspend dividend payments or stretch to service debt obligations. As the economy shifts and markets become more global, it takes cash to seize opportunities. Cash is the fuel in the engine. The problem is almost no one in an organization fully understands the impact they have on cash. Small decisions here and there have ripple effects that go unnoticed until they start to add up. This book will examine what it takes to put cash on an equal footing with sales, cost and service, finding the right equilibrium. It will look at attributes of a cash culture and explore ways that leaders can transform their organizations. This is not a finance textbook. While it will explain some of the most important, and often most misunderstood metrics, the aim is to keep the reader fully awake. Itll use case study examples and will offer concrete suggestions for improvements.
About the Author :
PETER W. KINGMA has over thirty years' experience advising some of the largest and most recognizable corporations in the world on their financial positions. He is an expert in helping firms increase cash on hand from operations and the effective use of capital. He is a strategy and transactions principal at EY Parthenon, leading the working capital practice in the Americas.
Review :
A comprehensive overview of all aspects of finance and cash management in business.
Kingma, a financial expert, acknowledges the long shadow cast by the Covid-19 pandemic, which not only shut down many of the world's economies but also highlighted how elongated and interconnected the global supply chain has become. Kingma acknowledges that businesses deal with many complicated factors, like supply-chain issues, product design and advertising, market competition, interest rates, and so on, but from his experience and research, he derives a very simple truth: "It takes cash to address market shocks." This simple truth has a vast and complicated network of realities underpinning it, and the author explores this by means of an ongoing fictional device: an electrical equipment company called Owens Electrical, run by a man named Bob. Owens does mostly business-to-business commerce, and since Bob rose through the company's ranks to become its CEO, his perspective gives Kingma the perfect vehicle to explain the intricacies of cash management in a successful company that does all of that managing in-house. The author goes over every aspect of order-to-cash (OTC) mechanics: gaining customers, taking their orders, invoicing and billing them, and receiving their cash in the bank. Along the way, Kingma dispenses a great deal of technical advice on all levels of finance, usually revolving around Days Sales Outstanding (DSO), or the number of days on average required to collect money from a particular customer.
The author's experience is obvious on every page. His ability to get to the heart of the many complicated subjects he raises is exemplary, as is his skill at dissecting those subjects in ways that will be immediately accessible to non-specialists (up to a point, anyway; the book clearly targets those in the business/finance world). Document, document, document, he advises: "Be very clear in how you manage credit and risk so that any deviation can be seen and approved in the proper chain of command." He reminds readers who may be overly inclined to delegate and compartmentalize responsibilities that, much like those over-stressed supply chains, everything is connected. Kingma is an invaluable guide to his subject, but the biggest and most pleasing surprise of his book is the fact that he's also a decent writer of fiction. His hypothetical company of Owens Electrical convincingly grows and becomes more complicated as it faces each new issue he wants to illustrate. Sometimes, his characters sound like business seminar transcripts instead of people: "We had to challenge our assumptions regarding talent and whom we needed in key roles," says one android to another. "We modified our metrics and incentives and transformed operations reviews." But most of the time, readers will find themselves at least as involved with the narrative as with the concepts. They'll cheer on Makayla, a surgeon raised by an immigrant mother in rural Missouri; they'll appreciate the fact that visionary Caesar likes to have new hires around him, to guard against the complacent thinking of the old guard; and they'll be just as surprised as Annette's co-workers when the steely, no-nonsense woman unexpectedly cracks a joke. Readers will come for the financial know-how, but some of them may very well stay in order to root for a company that isn't even real.
A thoroughly informative--and surprisingly gripping--manual for clear-eyed money management.
--KIRKUS REVIEWS
