This is a summary of the book titled “Cash is King” written by Peter W. Kingma and published by Wiley in 2024. As an entrepreneur, founders usually chase revenue, and cash is secondary concern but firms with strong cash positions can seize new opportunities and remain flexible. Using a fictional Owens Inc. the author draws this point through a comprehensive treatise on the topic of cash management. The procurement process from order placement to payment affects a company’s cash position. Business functions such as marketing and warehousing can also help optimize the cash position. Logistics, which is usually dynamic in nature, can help with inventory management and reduce cash freezes. The cash position for a firm can benefit from working capital management. Performance measurement metrics can aid managers. Improved cash management can boost a business’ resilience and guide it through bad times.

A business should prioritize cash flow over revenue generation to sustain growth. For example, Owens Inc., a manufacturer of electrical equipment, found that its sales terms were too favorable, and its internal processes were complicated, affecting invoicing and collections. The company's growth was driven by risk-taking and sales growth, but it neglected inventory management and internal processes. To manage sales and client management, companies should segment customers, implement credit review policies, track invoice payments, set collector targets, and adopt electronic payment methods. The procurement process, from order placement to payment, also impacts on a company's cash position. The procurement team must manage routine processes and deal with emergencies daily. The procurement team faces pressure and may not notice trade-offs that affect a company's cash position, such as lead times, minimum order quantities, and delivery times.

Business functions like marketing and warehousing can optimize cash position by synchronizing their interests and goals. Procurement personnel should focus on negotiating the best prices, while logistics management should be dynamic and adaptable to changing customer needs, transportation costs, and innovation. Marketing and engineering functions should monitor inventory to identify lost demand and ensure legitimate demand for new products. Logistics and warehousing should aim for higher service levels, requiring more inventory.

Logistics can affect a firm's cash flow through variations in batch size, use of technology, standardized terms of trade, customer-negotiated service terms, optimal warehouse management, and linking customer status updates to billing functions. These factors can disrupt existing dynamics and impact inventory management. The COVID-19 pandemic and global supply chains have also impacted inventory management.

Plant management procedures can optimize inventory investment for optimal returns. Investing in inventory that sells quickly and at a high margin yields more favorable returns than unused inventory. Safety stock is the level of inventory required to meet customer service standards, calculated based on historical variations. Minimal stock on hand for made-to-order products and minimal stock in transit can help reduce transportation time and minimum order requirements. Working capital management can improve a firm's cash position. A good financial controller can help businesses tackle accounting and financial reporting, following best practices like absorption costing and weighted average cost of capital (WACC). A company's stock price is affected by debt, and controllers should be cautious of using short-term debt costs without considering equity costs. Strong performance in one area can mask poor performance in another.

Managers should effectively use performance measurement metrics to gauge business performance and make informed decisions. Common metrics include inventory turns and cost per unit. However, they often do not align with operational metrics, leading to data integration issues or lack of review. Leadership metrics should serve as warning lights, guiding the company's health before it is too late. Operating metrics should capture the input management needs to measure, and key performance indicators and bonuses should be aligned with cash performance.

Improved cash management can boost a business's resilience and guide it through bad times. Recognizing the importance of cash flow is crucial, but many businesses consider it an afterthought. Companies with above-average working capital management tend to bounce back faster from setbacks and preserve shareholder capital better. Cash management is equally important for service sector firms, but the considerations are different.

To bring about sustainable changes, a cash leadership office should be formed, focusing on both cash position and growth. This ensures that the entire management team is on the same page and can advise the business on trade-offs or compromises.