If you are involved with a for-profit business in any way please remember one thing – cash is king. Of course respecting people is absolutely critical. But cash pays the bills. It buys things. It pays salaries. So without money in the bank all the respect in the world means little.
Sure, we can borrow money and hope to pay it back. But most executives I know would like nothing more than to see a nice pile of money in the bank. Further, if we are talking about publicly traded companies there are some nice people on Wall Street who also have vested interest in your financial stability.
While there are many ways of freeing up cash my all time favorite method is to increase the rate at which inventory turns.
The easiest way I know of to make people understand what we are talking about here is to take it to their garage.
Imagine you have started a business in your garage assembling bicycles. You have found your suppliers for the various components. You have negotiated the T’s and C’s (terms and conditions). And, lastly, you have spent most of your life savings – much to the chagrin of your significant other – on the inventory needed to start things up.
Let me put it another way – you’re broke. You have no more money in the bank. And if you don’t convert all the fancy bicycle frames and pedals (a.k.a. as assets on the balance sheet) into profit soon your kids grumbling stomachs will keep you awake at night.
It’s not a pretty picture is it? But for some reason most people don’t think of things this way. When it’s not our money, or our inventory, or our garage, or our children being directly impacted its easy to turn the other cheek.
Well, friends, I think its due time many of us take a more personal view over things like inventory and cash flow. For those of us in the west the survival of manufacturing as we know it may depend on it.
So, you agree, there is a problem. What to do about it? Please stay tuned over the coming weeks and months as I share some practical leadership, lean, and six sigma methods for attacking this serious issue head on.
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Photo by Tracy O