https://youtu.be/6pt4XOIZa7Y
Peter Kingma, Head of Working Capital Practice at EY Parthenon Americas, is driven by his curiosity and passion for solving problems to help leading companies crown their cash and master cash management. In "Cash is King," he emphasizes how effective cash flow management, distinct from revenue generation, is vital for sustained business growth and resilience.
We discuss his framework for converting revenue into cash: Collect Receivables Faster to boost liquidity and reduce dependency on credit, Pay Customers Slower to optimize cash utilization, and Accelerate Inventory Turns to minimize holding costs and enhance operational efficiency. These strategies not only streamline financial processes but also fortify businesses against market uncertainties, ensuring robust financial health and agility.
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Crown Your Cash with Peter Kingma
Good day, dear listeners, Steve Preda here with the Management Blueprint Podcast and my guest today is Peter Kingma, the head of the Working Capital Practice for EY Parthenon in the Americas and author of Cash is King: Mastering Cash Flow Management with Peter Kingma. Peter, welcome to the show.
Thank you, glad to be here.
Yeah, well, I'm glad you're here because actually, believe it or not, we are well into over 200 episodes, but we never actually addressed the king, which is cash, which is a big omission, I realize, and now we're going to make up for it. So, before we jump in on that, I'd like to ask you, what is your personal Why? What is it that gets you out of bed every morning?
I'm curious, Steve. That's my personal Why. I love to solve problems. Some might say that's because I have a short attention span that I like to go from problem to problem, but I love to solve problems. And the past 30 years of my professional career, I've been helping companies. Now, we'll talk about small businesses in this discussion, but admittedly big businesses for me, on a day-to-day basis, but helping them deal with cash and liquidity. And what I love, Steve, about what I do is I can measure the results. So I can see at the end of the day, I can see the benefits. And I'm very proud of the fact that my work helps some very iconic companies stay in business. And so there are people that are employed today because of decisions that they've made. And, yeah, that's my why. I love solving problems. And I like sort of tackling big questions.
Okay. Well, let's tackle the biggest question of all is why revenue is not the same as cash.
Yeah, let's start at the beginning. So, I think in business we understand revenue and profit fairly well, but we don't always understand the difference between that and cash. So if you think about revenue, let’s say we sell something, but if we haven’t gotten paid for it, and we don’t have, so to speak, the cash in our pocket, then we don't have the ability to pay our bills. And so, Steve, if you will, let me take you back in time to when I was just out of college and kind of a silly example of this, but I think that it kind of grounds itself really well.
When I was just out of college, I was living paycheck to paycheck. And fortunately, my employer paid me on the 1st and the 15th of every month. So, I knew when I was going to get paid. And fortunately, my landlord didn't come knocking on my door random days of the month asking for rent, I knew when that was when my bills were due as well. So even if I had, even if they gave me, you know, a little bit more money or a little bit less in any given month, I had to say I knew exactly when the revenue was coming in, when the cash was coming in, and when my bills were to be paid.
So, I think in many ways, we understand that in our household economics, but then we get into business and sometimes I think we get confused because we start to confuse and chase revenue and revenue alone and forget that it's the cash that pays the bills. It's the cash that you use to buy new equipment to invest.