Strategically Speaking: 19 Tips for Better Cash Flow Management

Effective cash management is critical to the health of any business, but the recession and associated credit crunch have made paying close attention to managing cash more important than ever. Tight credit, increased bank focus on compliance with existing loan covenants, and revenue streams with less predictability have made it essential that businesses pay more attention to cash inflow, outflow and retention.

Contrary to popular belief, cash management is not the sole province of the finance department. It requires the cooperation and participation of every major functional area of the organization.

More importantly, the new emphasis on cash management may require that certain long-cherished beliefs about the “right” way to manage the business be reexamined, and decisions based on lowest unit cost take a back seat to actions that conserve cash reserves. Here are some of your options.

Paper
With the possible exception of compensation and benefits expenses, inventory investment is likely to be a publisher’s largest single drain on cash.

Inventory takes two forms: raw materials (e.g., paper) and finished goods. While building raw-material inventory may be valuable in times of tight supply and rising costs, it is a questionable strategy under current market conditions.

1. If you must inventory paper, minimize the number of grades and sheet/roll sizes brought in. Many publishers print on a slightly oversized roll or sheet to keep inventory investment in check. The incremental cost of doing this will be more than offset by the lower storage charges, reduced inventory obsolescence, lower safety-stock requirements, and potential incremental discounts earned by purchasing larger lots.

2. Floor Programs: Many mills/merchants will stock popular grades and roll sizes on the floor at printers (effectively, a consignment program), allowing publishers to acquire inventory on the fly, with many of the same benefits as cited above.