Friday, May 15, 2009

Cash Management in Hard Times

Although written with the larger company in mind, the May 2009 issue of Harvard Business Review has an article that can be useful to small businesses as well: "Need Cash? Look Inside Your Company," by Kevin Kaiser and S. David Young. It also is available on-line.

They list six "don'ts" of working-capital management, that, though counter-intuitive, may be very useful in times such as these:

1. Don't manage to the income statement.
2. Don't reward the sales force for growth alone.
3. Don't overemphasize production quality.
4. Don't tie receivables to payables.
5. Don't manage by current and quick ratios.
6. Don't benchmark competitors.

We have been teaching some of these as "standard practice" in business school! What do you think of this different approach. I'd love to hear your thoughts and stories.

Dr. Bill - I love to share, I hope you do to! ;-)

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