May 7, 2024 • 34 mins
Cash is King: Mastering Cash Flow Management with Peter Kingma
Introduction: In this episode, we sit down with Peter Kingma, the author of Cash is King, to delve into the crucial role of cash flow management for businesses of all sizes. Peter's deep expertise in financial strategy and his practical approach to cash flow make this conversation essential listening for any business owner seeking financial resilience and growth. Host Marcia Riner provides insightful prompts that encourage Peter to share valuable strategies and anecdotes from his book, giving listeners a roadmap to better manage their own cash flow.
Key Takeaways:
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Cash Flow Prioritization: Peter underscores the importance of viewing cash flow as a strategic priority, explaining how it enables better decision-making and provides a buffer during economic uncertainty.
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Early Detection: Identifying cash flow problems early on can save businesses from significant financial distress. Peter shares signs to watch out for and practical methods to stay ahead.
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Proactive Financial Planning: By proactively managing cash flow with rolling forecasts and disciplined budgeting, businesses can achieve greater predictability and agility.
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Managing Working Capital: He shares tactics for optimizing working capital, such as tightening accounts receivable and strategically managing inventory.
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Cash Flow Improvement Strategies: Peter discusses various strategies from his book that businesses can implement quickly to see immediate improvements in their cash flow health.
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The Power of Financial Tools: Using financial tools like dynamic dashboards and KPIs, business owners can gain real-time insights to monitor and adjust their cash flow strategies.
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Mindset Shifts: Changing the mindset around cash management from reactive to strategic allows for longer-term growth and sustainability.
Conclusion: Peter Kingma's approach to cash flow management is pragmatic and actionable. This conversation provides listeners with foundational and advanced strategies to transform their cash flow from a point of stress into a competitive advantage. Tune in to gain insights that will help you and your business harness the power of cash flow management for greater profitability and financial health.
You can download a copy of Peter's book here https://app.box.com/s/opb7gplqygn92vrlhrbg5zvn36xslbg3
Want to supercharge your business, avoid profit plateaus, operational headaches, and growth roadblocks?
Marcia has created a brand-new Profit Booster® Playbook just for you. You’ll uncover 3 essential strategies and the quick way to take action on them. This is not just a single page report, its filled with impactful strategies, actionable steps, and expert guidance to elevate your profits painlessly.
Make this your best year ever. Download this free playbook at www.BoostingProfit.com
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About Marcia Riner. She is a business growth strategist who helps business owners dramatically increase their revenue, profit, and the value of their company. In fact, she can show prospective clients a clear pathway to profit and an impactful ROI for working here before hiring her firm. Through her proven Profit Booster® strategies, she gets results. Marcia is the CEO of Infinite Profit® and more information can be found at https://www.InfiniteProfitConsulting.com
Got questions? Text Marcia @ (949) 229-2112 ♾️
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Marcia Riner | Profit Booster™️ (00:06):
Hey, everybody, you know, when when we have a business we always worry about the ups and downs in the market, chasing customers and doing all sorts of crazy things. But did you know that the number one thing you need to consider in your business is how much cash you're working with.
Having. Cash is everything. It's opens up opportunities, gives you sleep, sleep during the night, and everything that you would ever imagine for. So let's talk about cash on today's profit with a plan podcast
(00:39):
hey, entrepreneurs, are you trying to make bigger profits in your small business, if you're like most of us business owners, increasing, your profitability is always on your mind, and you're probably looking for more ways to grow your revenue. While growing your company. Well, you found a podcast that shares ideas to help you do just that.
I'm Marcia reiner, known as the profit booster and a business growth strategist. I've helped tons of small business owners to establish and implement a tangible plan that guarantees increase profitability, guide your growth and plans for your future exit.
(01:11):
because building a highly profitable and sale ready business creates a win-win scenario. That's more money now, and a windfall when it's time to let go.
And I want to share strategies that I've learned with you on today's profit with plan. Podcast
but before we get started, I have something great to share with you my podcast audience.
If you ever wanted to supercharge your business, avoid profit plateaus, operational headlock, head head headaches or growth roadblocks.
(01:38):
I've got a brand new profit booster playbook. Just for you.
You'll uncover 3 essential strategies and a quick way to take action on them.
This is not just a single page report. It's filled with impactful strategies, actionable steps, and expert guidance to elevate your profits. Go download this free playbook@boostingprofit.com
(02:01):
alright. My guest today is he is the king of cash. Peter Kingma. Is America's working capital leader for ee Parthian. Why, why can't I speak today? Parthian? Working across a variety of sectors, including automotive aerospace, defense, healthcare, retail and consumer products. He advises business leaders on how to optimize the cash management.
(02:29):
His work has led to well over 25 billion dollars of value created for his clients.
Peter is a regular contributor to leading business publications and podcasts and often speaking at industry, events about his area of expertise.
His clients bring him into lead, planning sections, consult with management teams, and present to their boards.
(02:53):
Peter has, who has a degree in economic from Purdue
University, and lives in Chicago and Columbia, Missouri. You can learn more about peter@peterkingma.com Peter, if I can get my melt to work today, today's gonna be a great recording. I'm so happy to have you on. Welcome to profit with a plan.
Peter Kingma (03:13):
Thank you, Marcia. Great to be here.
Marcia Riner | Profit Booster™️ (03:15):
Awesome, awesome. So
we are. I first of all congratulations on the book. I just love the name cash as King, and if that wasn't ever the more and most important statement for every business owner to think about. I don't know what is.
So how did you come to the idea of writing a book.
Peter Kingma (03:35):
Yeah, so it's as you said in the intro. I've been working with companies for the past, you know, 30 years. On this topic on the topic of improving working capital, and cash flow, and all things liquidity.
And you know, what I observed over those years is that
we do a really good job of explaining revenue.
(03:58):
and we do a really good job of explaining, you know, cost containment or profitability.
and in many organizations, and I work with, you know, big organizations. But this the same principles could be applied to small businesses.
In many of these big organizations. Most of the employees. Most of the individuals
understand their role that they play either in revenue generation or in cost, containment, profitability.
(04:23):
and almost none of them understand the role that they play in the generation of, or the consumption of, cash.
So that's what I'd love to explore with you in this conversation today, and that I've put in the book is, you know, how do you get a better control over cash flow? Because, you know that is what makes a breaks of business. You can be profitable and still go bankrupt. You can be. You can have revenue and still have to pay taxes on it, even though the cash may not be in in your pocket.
(04:52):
So it's that vitally important concept of of generating cash that that excites me. And and the reason that I wanted to write this book to to help others.
Marcia Riner | Profit Booster™️ (05:04):
I love it, and you know what I have to say even more importantly
to smaller micro businesses and those that are really thriving
hashes everything
when it comes to it, because you may have a a longer pay cycle to get your money out, but you still need to pay your employees, but having that cash gives you that and I think you coined the phrase with the opportunities right? That is so very important where I think the larger companies, even though that they
(05:40):
they cash, is still important to them. They may have more more opportunities or more flexibility where the smaller company. They're they're almost living paycheck to paycheck in that kind of mindset. And so that's why I wanted to bring you on and really talk about the advantages and and opportunities that looking at your cash ability and managing that in the best way, can really lift that company up farther and faster.
Peter Kingma (06:07):
I love it. Let me, you know if I can. Let me tell you a silly little story. From the very beginning, when I got out of college, and then I'll kind of tie it together back to the where we were headed. And that is, you know. So right out of college. I was living paycheck to paycheck
you know I but fortunately I knew when I was going to get paid. I got paid on the first and the fifteenth.
(06:28):
and fortunately my landlord didn't come knocking on the door, demanding rent whenever he wanted you know I had set dates where I knew when my car payment or my rent payment was coming due.
Now I say that the the days leading up to those pay days were kind of lean. I refer to them as my tuna fish days, because all I could afford was canned tuna fish as eating like a common house cat. But you know we learn this concept in our household management of cash flow right? We understand the the importance of having cash on hand to pay our bills and to meet our obligations.
(07:07):
Somehow, when we get into business, we sort of lose some of those basic principles. And so we get very excited about chasing revenue, for example.
and selling, and you know, and and recording how much revenue we've generated. But yet somebody may not have paid us yet. Or we may have had to agree to longer payment terms. And you know, and or we tie up too much of our cash into things like inventory that's not selling, and so we can't churn off the cash. And so it's not just about
(07:40):
meeting, you know, sort of payroll and the obligations. But it's also
it's that liquidity that will enable you to grow your business and to take advantages. So you know, you may have a competitor. That's that's struggling, and you want to pounce, or you may want to enter into a new market or buy some new equipment, and if you don't have that capital.
(08:01):
You can't do that, and the cash, the cash you generate from your business is always going to be the cheapest form of capital that you're going to have access to far cheaper than going out and taking on debt.
Marcia Riner | Profit Booster™️ (08:15):
Yeah.
Peter Kingma (08:15):
Yeah, yeah. So that's so, it's an exciting topic for sure.
Marcia Riner | Profit Booster™️ (08:19):
No, I think it's I think it's really good in in. You're right. So many businesses look at. Oh, well, I made a sale. So the sale was X. And so now they're already spending that money on something else before realizing that that money hasn't even crossed over yet.
Peter Kingma (08:38):
That's true. And so many times when we chase these sales.
we
we forget to bake in the costs associated with things like commercial terms like how you know the payment terms or maybe even service level agreements, you know, if we're providing products or services. And so we get to the end of the negotiation on price, and then the the customer comes back and demands 120 day payment terms or or certain contractual agreements.
(09:08):
And we're kind of stuck because we've kind of lost our negotiating power at that point. And so we have to agree to that. So in the book. I kind of explore lots of practical tactics to take
to bake that sort of cost, to serve the total cost to serve of a customer into the equation. So that you have. You have full visibility of that, because the idea is, maybe those are really great business decisions.
(09:31):
Maybe you would. Do you know you would do him over again? But you want to do it in an informed way, and you know you wanna you wanna place your bets on the customers, and the deals that are gonna turn, you know, turn out to have the greatest rates of return, and not get caught by surprise at the end, after you've negotiated that you now suddenly agreed to a bunch of commercial terms that that are gonna be difficult to live with.
Marcia Riner | Profit Booster™️ (09:55):
Exactly. And I think that that's you know, like you said that. It's it's different than the personal environment, right where you just know you've got these bills coming in, and you're gonna get your paycheck on this day
we have to shift our mind and saying, Okay, what are the variables that come with the income that we have coming out. And just because, you know, if you've got a hundred 20 day, you know, on your on your payment that you're receiving. Your employees still need to be paid. Your your vendors still need to be paid your you know the the rent on the building, the utilities, the the products to make that has to be paid. So you have to think about
(10:34):
as you said, the dominoes, and how they play down before you make that. You know the negotiation on it.
Peter Kingma (10:42):
That's right. And you know, as a small business, small businesses may not have a lot of bargaining power. And then we talk about that. I talk about how to assess. You know where you sit in sort of the polarity, if you will, of power.
Marcia Riner | Profit Booster™️ (10:57):
The food chain.
Peter Kingma (10:58):
Yeah, where are you? Are you a Guppy, or are you a.
Marcia Riner | Profit Booster™️ (11:01):
Sure.
Peter Kingma (11:02):
But if you are a Guppy
then then you need to make sure you control all the things that are within your control. Let's let's stick to billing and and and collections for just a minute.
You know. Too often I see that that becomes kind of an afterthought like we do 5 other things before we, you know, get up and try and do all the clerical work to get bills out the door on time on into the right place with the right, you know, maybe purchase sort of reference requirements, and every day that you delay in that or anything that you you know
(11:35):
any inaccuracy that you have? Is gonna just cause it's gonna cause downstream problems. And it's gonna cause delay in getting paid. You know, most
there are deadbeats out there, but most companies do pay on time or close to time, for sure, and and quite often the delay is is not the customer's fault. The delay is our fault. And so as a small business owner, if you, if you can't control the the commercial terms for sure, be in control of all the things that are within your control, like getting bills out the door correctly into the right location.
Marcia Riner | Profit Booster™️ (12:13):
Nice, nice. Yeah, that brings that brings to mind. You know, a, a, a typical challenge in the in the health environment. Right is is getting that insurance claim paid right. They've treated the client already, or the customer already, and now they've got to pay somebody
to go chase that claim for them so they can get paid, and then they end up negotiating on it to get a partial. You know. I mean, there's so many different avenues they can. They are out of our control that if we can control the ones, what? What? 3 or 4 that we're allowed to control? You know, that makes it a little bit better. But I think that the business owners forget about all the minutia on the outside
(12:51):
right. They see client
customer revenue paid done out. They forget even about the delivery of the service and the people they need to pay, and the and the products that they need to provide to produce the service or product that they're sending out the cost of get sold.
Peter Kingma (13:10):
That's right. And you know, and you raise a great point. Because I think, too, when we live in a P and L dominated environment.
we may make decisions that make sense from a P and L standpoint, but that don't make sense from a balance sheet standpoint.
Marcia Riner | Profit Booster™️ (13:26):
For example, the the ugly word balance sheet, right.
Peter Kingma (13:29):
Yeah, I know no one wants to. Oh, I should say at the outset, this book is not a textbook. Fear not. They're not complicated formulas that you're gonna have to memorize. In fact, I wrote it as a fictional story meaning it's a fictional company. Every chapter they're trying to solve a problem. Because I wanted to take some of these seemingly, you know, boring and sometimes complicated concepts and present it in a way that
(13:56):
my, you know my family would want to read that small businesses would be able to access and read but but back to the point on procurement, you know sometimes what we'll see we'll do is we'll go and we'll chase a cheaper part or chase, you know.
cheaper source of material which makes great sense in from the P. And L. Standpoint. But maybe we agreed to a greater minimum order quantity or a longer lead time. And and that may not make sense, because we may be now tying up precious cash in inventory and in materials that's not turning very fast.
(14:32):
So it's again it's getting to. It's it's understanding that the third leg of the stool
between revenue and profitability is cash flow, and you gotta make those. You gotta evaluate those decisions with a with that lens as well as the other 2. You know, if you're going to be able to
(14:53):
grow your business and and weather storms.
Marcia Riner | Profit Booster™️ (14:57):
And I that is.
and there's not one that is more important than the other. Yes, revenue is very important. Yes, profitability is very important. But yes, cash is incredibly important as all. And I think they hold they're on that that balance of the scale that they're all equally important.
Peter Kingma (15:16):
They're all equally important. And one thing I talk about is, every dollar that you invest in your business
costs the same.
but produces different rates of return. And so, you know, when you, when you Eval, you know when you are going to use your precious capital.
that cash you want to make sure you're using it intentionally. And so that's that, you know, to your point of evaluating the 3 criteria I want to. If I'm going to enter into a commercial agreement with a customer that is going to be, you know, complicated and maybe tie up cash. I want to do that for my profitable customers, my customers. Where that makes sense. I want to intentionally do that. I don't necessarily want to apply that to everybody, because not all customers are alike.
(16:00):
One concept I talk about is, you know, really calculating that total cost to serve
what I bet you'll find and what I see, you know. Time and time again is something that we call the Pareto principle, which is that you know oftentimes 20 of your customers account for 80% of the profitability, and then the flip so you want to make these intentional decisions with your cash and your capital and and not, you know, not just relegate that to you know, to to sort of after the fact. Kind of thinking.
Marcia Riner | Profit Booster™️ (16:31):
Well, and I know that there's a lot of people that have this fear of taking on debt right? And they would prefer to use their cash rather than to go, put it on a credit card, or pay the credit card off immediately with the cash, and they got a 30 day window on it versus
utilizing the ability of capital, so that you still have cash on hand for those important opportunities. I'm not saying, you know, taking on debt is a good thing, but taking on debt may be a better thing sometimes than cash. Is that still true in your space?
Peter Kingma (17:09):
Well, we we so yes and no, right.
Marcia Riner | Profit Booster™️ (17:12):
And so let's let's.
Peter Kingma (17:13):
Let's use. Yeah, let's use the let's use the pandemic is a great example.
When that hit
all heck broke loose right? We had supply chains that were disrupted. You know, I think each of us in our own personal lives became supply chain experts so we couldn't get toilet paper. But you know, and we spent a lot more on transportation costs and other things. Well, so in response to that, you know, the the markets. Really kind of create a situation. We had free cost to capital
(17:43):
right? And so we got into this period. And I see this with big companies and small companies. We got into this period, where we just assumed that the cost of debt was, you know, was nothing, and that cash was free.
And so then we took on a bunch of debt. But you know you still have to service that debt. And that also limits how much more you can do. You know, there's only a a certain amount that you can actually take on relative to your revenue and your profitability.
(18:09):
But now we're in an environment where the cost of debt is
back up. And and if you've been following the fed, it's probably not going down anytime soon. Zoom Phone.
Marcia Riner | Profit Booster™️ (18:19):
Thank you.
Peter Kingma (18:20):
Going up?
So so that that sort of variable or that equation of, you know, should you take on debt is a nuanced one right? It really has to do with how much leverage do you already have? You know how how expensive is that debt? And and yeah.
Marcia Riner | Profit Booster™️ (18:38):
Came in.
Peter Kingma (18:38):
It always does. Yeah, you're always gonna factor that into your equation. But what I'm trying to spread the gospel on is, you know, the Ca, the cash that you're gonna generate from your internal operations. And let's just use a manufacturing example. We could apply it to services as well. But if you think about it, you know, if you're in a business that's that's selling something, you're gonna you know, it's the time that you put cash out to buy something.
(19:02):
and then you make something, and then you sell it. And then you collect that cash right? It's that cycle. And you want that cycle to be as fast as possible, because as that
then starts to churn off cash that actually turns off capital for your business. And that's what creates wealth, and that's what gives you the opportunity, then, to go reinvest, to do, expand? You know all those great things that that cash that you're gonna generate just from your own operations, is not. It's it's both the cheapest form of cash and capital that you're gonna find. Access to.
(19:35):
It also is a great barometer for the health of your business. You know, and we talk about profitable businesses can go bankrupt, you know, so it it will really point out where you have process failures, and where you may be also spending, you know, too much money on certain aspects, like collections, or like getting bills out, or or the like.
Marcia Riner | Profit Booster™️ (19:58):
Yeah, that's that's really that's and see. That's why that's why I wanted to bring you on today is because there's so many different nuances that we need to look at, and most business owners, at least in the smaller space, the under 10 million space they often are, you know, tied up doing this looking at? How do I get my company to to produce more? And where's the next customer? And stop, you know? Put out that fire and put out that fire where they're not looking at the nuances of accounting, because a
(20:27):
they don't know how or they don't like it, or it's very scary, and then they rely on an accounting team.
part-time full-time in-house outhouse to to make recommendations to them that they may not be getting so. The.
Peter Kingma (20:41):
Yeah.
Marcia Riner | Profit Booster™️ (20:41):
I wanted to bring you on. And really highlight the areas to say, look business owners, there's lots of opportunities
that cash allows.
And we need to make sure we're thinking of it as as an opportunity and making sure we're making good decisions with them.
Peter Kingma (20:57):
That's right, you know, and there are listed as a
I. I've been accused of bringing dinner parties to a halt when I talk about what I do for a living, because I love it. But I recognize that this isn't what you know. Most people go into business
because they're passionate about something else. Right? They're not passionate about accounting, or they're not passionate about managing these kind of things. And there are all these like terms that we throw out and and you know, metrics and measurements and all that, that. Sometimes we gloss over them.
(21:27):
So I you know this is what I tried to tackle in the book with humor is kind of understanding some of these seemingly you know, boring concepts. But, man, they're important to understand, you know. I'll I'll give you one example is when you talk about again a manufacturing environment.
you'll often hear a term called absorption accounting. And this is a concept of, you know, if you've got an asset, you've got a machine, you can. You can take the cost of that machine essentially and spread it out over the things that you're making with that machine, you know. You could take that cost and then divide that over the over, the output over the inventory.
(22:03):
and that has an effect of making your profitability look better.
But if you do that too much, if you're producing too much that way, you end up with too much inventory, and so that can then encumber your cash. And so it's it's just it's going into some of these somewhat seemingly dry concepts
(22:23):
and getting a good understanding, because it's it's, you know, as a business owner it's critical that you, you know that you at least consider these these concepts. Whether they're they're exciting or not. They're gonna they're gonna impact your business.
Marcia Riner | Profit Booster™️ (22:37):
And they're gonna impact it in one of 3 ways. Whether it's your your, the value, the the profitability, or the cash that you have in in the company for those opportunities and things that you wanna do with it.
that's why that's again. That's why this is so important. So when we look at this, if we were to say to business owners in the smaller space and say to them, You know, how do you do it. This is a little overwhelming. This is a little like, you know I I don't want to do that because I'm running a chiropractic office, or I'm I'm a plumbing company, and I got 6 trucks.
(23:16):
How do I? How do I? How do I? How do they get into this? How do they figure this out.
Peter Kingma (23:21):
Yeah, it's it's fun, right? Because at one level it seems so incredibly straightforward and simple.
Marcia Riner | Profit Booster™️ (23:28):
For some of us.
Peter Kingma (23:29):
Or you know, just if you take it at the highest level get people to pay you faster. Pay people slower don't hold as much inventory in the story. No need to buy a book. You you're done but it's the it's the trick of how do you actually do that given the business that you're in.
And so yeah, so you're right. So that so what I've done is, I've tried to outline all of the different stages of managing, and I start off with trade working capital, which is your receivables, payables, and inventory. And then I get into things like, you know, what if you have logistics, or what if you have
(24:04):
production? And then I get into things like, you know, what kind of metrics and incentives should you consider. Here's a here's a freebie or a good one here, you know. If you're if you're paying commissions to your salespeople on revenue, you might want to consider paying them on collected revenue.
Right? Because, yeah, then you start to get them involved in that. You know, negotiation upfront about what my terms are going to be, and they've got a vested stake in making sure, you know that they getting back to the customers, if for some reason they're slow paying. So it's just stuff like that. So I try and break down, you know, to your point of like, how do you get started? So each chapter kind of goes through a scenario, and then I have you know some best practices that you can follow as well.
Marcia Riner | Profit Booster™️ (24:47):
Good. So it's one of those easier red books because they're telling me stories of things that you're like. Oh, I didn't realize that right.
And and we know that many of today's counting people are fantastic at looking backwards and saying, These are the direct. This is what you should have done, or this is how we can do it. But finding those people that can say, Hey.
(25:08):
here's an idea. Have you thought about this
process? And it's a financial process in your business that you didn't think about before, because you're busy swinging the hammer.
And I think that's the partnerships that I love having books like yours that come to market that really educate the business owner to go. Huh? I didn't think about that because they didn't think about it until someone brought it to their attention.
Peter Kingma (25:36):
Yeah, you know, and if misery loves company
I spend. I spend my time working with very, very big, very well known companies.
and you know, for them. The issue is, they've got all these people spread throughout the organization that are making all these decisions. And you know the the people at the top don't really even know who's making all these decisions and that are tying up, you know, that could be encumbering cash So
(26:02):
so if misery loves company. Even the big guys are doing this. But I'll tell you what we also, I coauthored a study
and you can access that on my website. We'll give you that information as well. But where we looked at I think it was a thousand companies globally, and we we analyze those that perform better in the top quartile of cash performance.
(26:23):
and what we've got empirical evidence to show that when there is a downturn those companies are less susceptible to it. They come out of the downturn faster. They don't go nearly far down as as the others, and these and there could be differentials on profit and revenue between them. But it's the cash element that's that's the difference maker, right? And so that's this. That's if if there's any takeaway from this discussion
(26:47):
today. It's that, you know, cash is the lifeblood of a business. And because it's, you know, that's what you can actually invest.
You know. Buy stuff with pay, people with not the not the promised revenue or not the inventory that's sitting on the shelf, even though it has value. You still have to sell that and liquidate that at some point.
Marcia Riner | Profit Booster™️ (27:09):
Exactly exactly. And I think that you know, having having that 3 legged stool, as you, as you said in the beginning to really focus on the 3 areas of it adds so much more to the company. And and when we talk about opportunities.
listeners we're talking about, maybe it's an opportunity to grab you know, inventory at a lower price or or products to build at a lower price. Maybe you can make that investment
(27:36):
in new equipment. Or maybe you can make that investment in a new market, or strategy, or or hiring a better person, or invest in the people that you have keep great people. It's all that moveability
that when you're strapped, or you're thinking, here's promised revenue. Or here's product that I haven't sold yet. It. Just it just doesn't give you any wiggle room that that you really wanna have. And I think, you know, having that
(28:11):
flexibility and being agile and nimble in business creates so much more
security, safety, comfort, calmness, no rough tossing attorney at night, when you know you have something in the in the, in the checking account to to make, you know, make decisions with.
Peter Kingma (28:32):
Right. And you know. So so while I we've and we've largely been talking about a a you know scenarios where somebody's making products right and it. And admittedly, that's
the fictitious company I created in there makes products. But then I do spend the last chapter talking about how this could apply to services, business, professional services, businesses. You brought up healthcare. And my goodness, that so the the process around
(28:59):
getting paid or the claims submission process is often referred to as revenue cycle management. And so I kind of try. You know, you could write volumes on that concept alone. But I try and break that down and talk about. You know what the payers are going to require admissions process. If you're a doctor, things that you might want to consider doing on the front end. So there are kind of
(29:19):
practical tips here for services, businesses, professional businesses as well. That you know that it's not just a manufacturing company.
Marcia Riner | Profit Booster™️ (29:29):
Oh, a hundred percent. Just because you're selling a product or a service, there's still there's still levers that you can pull to make these arrangements come out, you just if you're selling products. You've got a cost of good sold that are more impactful than the service. But it's still in services. You still have a cost of goods sold. They're just not as high on the on the the P. And L. And the balance sheet as as the other company, but there's still so many levers that you can pull
(29:57):
if you're aware of them.
Peter Kingma (29:59):
That's right, and if you are, you know.
if you're a professional services
like you know, lawyers, accountants,
you know, consultants oftentimes and again
disclaimer. Here I'm not an accountant, but oftentimes you will be. You will set up something called, you know, cash accounting versus accrual accounting. So that means you're paying. You know you're paying your taxes based on you're paying up based on the cash that you have in hand. If that's the case.
(30:27):
then it's even more important for you to focus on cash, because that's the cash
that's the cash that you actually have versus, you know, being able to leverage accrued revenue. If you're gonna go out and borrow, or or something along those lines, that's the cash that actually gets redistributed to the printer.
Marcia Riner | Profit Booster™️ (30:43):
So hmm.
Peter Kingma (30:44):
So yeah, so we talk about that. We talk about how it impacts. You know, professional services as well as those that are, you know, making and selling stuff.
Marcia Riner | Profit Booster™️ (30:52):
Awesome.
Well, Peter, you said Cash is king right in the in the title of your book, and I believe it. 1,000. Where can listeners find out more about you and the book and the ideas that you share.
Peter Kingma (31:06):
I love that you asked me that. Thank you. Peter kingman.com is my website, and you can download the introduction to the, to the, to the book. You can also, I post all of the other things. You know different things. I've written different podcast interviews and the like. So there's more content there that you can access as well.
(31:27):
You know. And then the book is available. You know, everywhere, Barnes and noble target Amazon. All that sort of thing.
Marcia Riner | Profit Booster™️ (31:33):
Love it, love it as a fantastic title. So kudos to you on that one. But I think listeners, you know.
we're not. Gonna we're not gonna drink from a fire hose and become an accounting expert on business. But if you can get
one new idea
and implement it into your business.
(31:53):
Those little incremental changes can make so much more for your company than you ever imagined. So my philosophy is like incremental changes and big results right. And so
don't think that this is gonna be this
over. You know.
you're gonna sleep overnights, and you're gonna have all these challenges. And then you're gonna turn your company upside down. It's just the little itty, bitty things.
(32:18):
But making those changes can improve your company, value
the the cash that's flowing through the opportunities you can have the value of the company, the relationships with your customers, I mean, I can go on for days about the benefits that, having proper cash flow in. Your company can can do for you. So I encourage you. Go, get the book.
(32:41):
read it, grab an idea today, grab another idea next month or next quarter and just start implementing. I I know that you'll look at it in in in the rear view mirror and go. Wow! That was the best investment of my time.
Alright! Thanks for listening. I hope you found a couple of ideas to put into your business that will help you become more profitable.
(33:04):
As I mentioned before. If you want to supercharge your business, go ahead and download my new profit booster playbook packed with 3 strategies and the actual steps that you can use to make this your most profitable year ever.
and go grab it for free@boostingprofit.com.
and Peter and I would love to hear your questions.
(33:25):
Tell us what what idea you want to do, or maybe what challenge you have? Just tell us in the in the in the comments, what it is that you've taken away from our story, and what kind of idea you're gonna implement? We would love to comment back on it and maybe direct you in the right path
while you're at it. Please subscribe.
And you want to catch profit with a plan on any of your favorite podcast players. We're looking forward to more great profitable information on next week's show. So until then, make your plans and profit with them, thanks. So much, Peter.
Peter Kingma (33:55):
Thanks, Marcia, great to be with you.
Hey, everybody, you know, when when we have a business we always worry about the ups and downs in the market, chasing customers and doing all sorts of crazy things. But did you know that the number one thing you need to consider in your business is how much cash you're working with.
Having. Cash is everything. It's opens up opportunities, gives you sleep, sleep during the night, and everything that you would ever imagine for. So let's talk about cash on today's profit with a plan podcast
(00:39):
hey, entrepreneurs, are you trying to make bigger profits in your small business, if you're like most of us business owners, increasing, your profitability is always on your mind, and you're probably looking for more ways to grow your revenue. While growing your company. Well, you found a podcast that shares ideas to help you do just that.
I'm Marcia reiner, known as the profit booster and a business growth strategist. I've helped tons of small business owners to establish and implement a tangible plan that guarantees increase profitability, guide your growth and plans for your future exit.
(01:11):
because building a highly profitable and sale ready business creates a win-win scenario. That's more money now, and a windfall when it's time to let go.
And I want to share strategies that I've learned with you on today's profit with plan. Podcast
but before we get started, I have something great to share with you my podcast audience.
If you ever wanted to supercharge your business, avoid profit plateaus, operational headlock, head head headaches or growth roadblocks.
(01:38):
I've got a brand new profit booster playbook. Just for you.
You'll uncover 3 essential strategies and a quick way to take action on them.
This is not just a single page report. It's filled with impactful strategies, actionable steps, and expert guidance to elevate your profits. Go download this free playbook@boostingprofit.com
(02:01):
alright. My guest today is he is the king of cash. Peter Kingma. Is America's working capital leader for ee Parthian. Why, why can't I speak today? Parthian? Working across a variety of sectors, including automotive aerospace, defense, healthcare, retail and consumer products. He advises business leaders on how to optimize the cash management.
(02:29):
His work has led to well over 25 billion dollars of value created for his clients.
Peter is a regular contributor to leading business publications and podcasts and often speaking at industry, events about his area of expertise.
His clients bring him into lead, planning sections, consult with management teams, and present to their boards.
(02:53):
Peter has, who has a degree in economic from Purdue
University, and lives in Chicago and Columbia, Missouri. You can learn more about peter@peterkingma.com Peter, if I can get my melt to work today, today's gonna be a great recording. I'm so happy to have you on. Welcome to profit with a plan.
Peter Kingma (03:13):
Thank you, Marcia. Great to be here.
Marcia Riner | Profit Booster™️ (03:15):
Awesome, awesome. So
we are. I first of all congratulations on the book. I just love the name cash as King, and if that wasn't ever the more and most important statement for every business owner to think about. I don't know what is.
So how did you come to the idea of writing a book.
Peter Kingma (03:35):
Yeah, so it's as you said in the intro. I've been working with companies for the past, you know, 30 years. On this topic on the topic of improving working capital, and cash flow, and all things liquidity.
And you know, what I observed over those years is that
we do a really good job of explaining revenue.
(03:58):
and we do a really good job of explaining, you know, cost containment or profitability.
and in many organizations, and I work with, you know, big organizations. But this the same principles could be applied to small businesses.
In many of these big organizations. Most of the employees. Most of the individuals
understand their role that they play either in revenue generation or in cost, containment, profitability.
(04:23):
and almost none of them understand the role that they play in the generation of, or the consumption of, cash.
So that's what I'd love to explore with you in this conversation today, and that I've put in the book is, you know, how do you get a better control over cash flow? Because, you know that is what makes a breaks of business. You can be profitable and still go bankrupt. You can be. You can have revenue and still have to pay taxes on it, even though the cash may not be in in your pocket.
(04:52):
So it's that vitally important concept of of generating cash that that excites me. And and the reason that I wanted to write this book to to help others.
Marcia Riner | Profit Booster™️ (05:04):
I love it, and you know what I have to say even more importantly
to smaller micro businesses and those that are really thriving
hashes everything
when it comes to it, because you may have a a longer pay cycle to get your money out, but you still need to pay your employees, but having that cash gives you that and I think you coined the phrase with the opportunities right? That is so very important where I think the larger companies, even though that they
(05:40):
they cash, is still important to them. They may have more more opportunities or more flexibility where the smaller company. They're they're almost living paycheck to paycheck in that kind of mindset. And so that's why I wanted to bring you on and really talk about the advantages and and opportunities that looking at your cash ability and managing that in the best way, can really lift that company up farther and faster.
Peter Kingma (06:07):
I love it. Let me, you know if I can. Let me tell you a silly little story. From the very beginning, when I got out of college, and then I'll kind of tie it together back to the where we were headed. And that is, you know. So right out of college. I was living paycheck to paycheck
you know I but fortunately I knew when I was going to get paid. I got paid on the first and the fifteenth.
(06:28):
and fortunately my landlord didn't come knocking on the door, demanding rent whenever he wanted you know I had set dates where I knew when my car payment or my rent payment was coming due.
Now I say that the the days leading up to those pay days were kind of lean. I refer to them as my tuna fish days, because all I could afford was canned tuna fish as eating like a common house cat. But you know we learn this concept in our household management of cash flow right? We understand the the importance of having cash on hand to pay our bills and to meet our obligations.
(07:07):
Somehow, when we get into business, we sort of lose some of those basic principles. And so we get very excited about chasing revenue, for example.
and selling, and you know, and and recording how much revenue we've generated. But yet somebody may not have paid us yet. Or we may have had to agree to longer payment terms. And you know, and or we tie up too much of our cash into things like inventory that's not selling, and so we can't churn off the cash. And so it's not just about
(07:40):
meeting, you know, sort of payroll and the obligations. But it's also
it's that liquidity that will enable you to grow your business and to take advantages. So you know, you may have a competitor. That's that's struggling, and you want to pounce, or you may want to enter into a new market or buy some new equipment, and if you don't have that capital.
(08:01):
You can't do that, and the cash, the cash you generate from your business is always going to be the cheapest form of capital that you're going to have access to far cheaper than going out and taking on debt.
Marcia Riner | Profit Booster™️ (08:15):
Yeah.
Peter Kingma (08:15):
Yeah, yeah. So that's so, it's an exciting topic for sure.
Marcia Riner | Profit Booster™️ (08:19):
No, I think it's I think it's really good in in. You're right. So many businesses look at. Oh, well, I made a sale. So the sale was X. And so now they're already spending that money on something else before realizing that that money hasn't even crossed over yet.
Peter Kingma (08:38):
That's true. And so many times when we chase these sales.
we
we forget to bake in the costs associated with things like commercial terms like how you know the payment terms or maybe even service level agreements, you know, if we're providing products or services. And so we get to the end of the negotiation on price, and then the the customer comes back and demands 120 day payment terms or or certain contractual agreements.
(09:08):
And we're kind of stuck because we've kind of lost our negotiating power at that point. And so we have to agree to that. So in the book. I kind of explore lots of practical tactics to take
to bake that sort of cost, to serve the total cost to serve of a customer into the equation. So that you have. You have full visibility of that, because the idea is, maybe those are really great business decisions.
(09:31):
Maybe you would. Do you know you would do him over again? But you want to do it in an informed way, and you know you wanna you wanna place your bets on the customers, and the deals that are gonna turn, you know, turn out to have the greatest rates of return, and not get caught by surprise at the end, after you've negotiated that you now suddenly agreed to a bunch of commercial terms that that are gonna be difficult to live with.
Marcia Riner | Profit Booster™️ (09:55):
Exactly. And I think that that's you know, like you said that. It's it's different than the personal environment, right where you just know you've got these bills coming in, and you're gonna get your paycheck on this day
we have to shift our mind and saying, Okay, what are the variables that come with the income that we have coming out. And just because, you know, if you've got a hundred 20 day, you know, on your on your payment that you're receiving. Your employees still need to be paid. Your your vendors still need to be paid your you know the the rent on the building, the utilities, the the products to make that has to be paid. So you have to think about
(10:34):
as you said, the dominoes, and how they play down before you make that. You know the negotiation on it.
Peter Kingma (10:42):
That's right. And you know, as a small business, small businesses may not have a lot of bargaining power. And then we talk about that. I talk about how to assess. You know where you sit in sort of the polarity, if you will, of power.
Marcia Riner | Profit Booster™️ (10:57):
The food chain.
Peter Kingma (10:58):
Yeah, where are you? Are you a Guppy, or are you a.
Marcia Riner | Profit Booster™️ (11:01):
Sure.
Peter Kingma (11:02):
But if you are a Guppy
then then you need to make sure you control all the things that are within your control. Let's let's stick to billing and and and collections for just a minute.
You know. Too often I see that that becomes kind of an afterthought like we do 5 other things before we, you know, get up and try and do all the clerical work to get bills out the door on time on into the right place with the right, you know, maybe purchase sort of reference requirements, and every day that you delay in that or anything that you you know
(11:35):
any inaccuracy that you have? Is gonna just cause it's gonna cause downstream problems. And it's gonna cause delay in getting paid. You know, most
there are deadbeats out there, but most companies do pay on time or close to time, for sure, and and quite often the delay is is not the customer's fault. The delay is our fault. And so as a small business owner, if you, if you can't control the the commercial terms for sure, be in control of all the things that are within your control, like getting bills out the door correctly into the right location.
Marcia Riner | Profit Booster™️ (12:13):
Nice, nice. Yeah, that brings that brings to mind. You know, a, a, a typical challenge in the in the health environment. Right is is getting that insurance claim paid right. They've treated the client already, or the customer already, and now they've got to pay somebody
to go chase that claim for them so they can get paid, and then they end up negotiating on it to get a partial. You know. I mean, there's so many different avenues they can. They are out of our control that if we can control the ones, what? What? 3 or 4 that we're allowed to control? You know, that makes it a little bit better. But I think that the business owners forget about all the minutia on the outside
(12:51):
right. They see client
customer revenue paid done out. They forget even about the delivery of the service and the people they need to pay, and the and the products that they need to provide to produce the service or product that they're sending out the cost of get sold.
Peter Kingma (13:10):
That's right. And you know, and you raise a great point. Because I think, too, when we live in a P and L dominated environment.
we may make decisions that make sense from a P and L standpoint, but that don't make sense from a balance sheet standpoint.
Marcia Riner | Profit Booster™️ (13:26):
For example, the the ugly word balance sheet, right.
Peter Kingma (13:29):
Yeah, I know no one wants to. Oh, I should say at the outset, this book is not a textbook. Fear not. They're not complicated formulas that you're gonna have to memorize. In fact, I wrote it as a fictional story meaning it's a fictional company. Every chapter they're trying to solve a problem. Because I wanted to take some of these seemingly, you know, boring and sometimes complicated concepts and present it in a way that
(13:56):
my, you know my family would want to read that small businesses would be able to access and read but but back to the point on procurement, you know sometimes what we'll see we'll do is we'll go and we'll chase a cheaper part or chase, you know.
cheaper source of material which makes great sense in from the P. And L. Standpoint. But maybe we agreed to a greater minimum order quantity or a longer lead time. And and that may not make sense, because we may be now tying up precious cash in inventory and in materials that's not turning very fast.
(14:32):
So it's again it's getting to. It's it's understanding that the third leg of the stool
between revenue and profitability is cash flow, and you gotta make those. You gotta evaluate those decisions with a with that lens as well as the other 2. You know, if you're going to be able to
(14:53):
grow your business and and weather storms.
Marcia Riner | Profit Booster™️ (14:57):
And I that is.
and there's not one that is more important than the other. Yes, revenue is very important. Yes, profitability is very important. But yes, cash is incredibly important as all. And I think they hold they're on that that balance of the scale that they're all equally important.
Peter Kingma (15:16):
They're all equally important. And one thing I talk about is, every dollar that you invest in your business
costs the same.
but produces different rates of return. And so, you know, when you, when you Eval, you know when you are going to use your precious capital.
that cash you want to make sure you're using it intentionally. And so that's that, you know, to your point of evaluating the 3 criteria I want to. If I'm going to enter into a commercial agreement with a customer that is going to be, you know, complicated and maybe tie up cash. I want to do that for my profitable customers, my customers. Where that makes sense. I want to intentionally do that. I don't necessarily want to apply that to everybody, because not all customers are alike.
(16:00):
One concept I talk about is, you know, really calculating that total cost to serve
what I bet you'll find and what I see, you know. Time and time again is something that we call the Pareto principle, which is that you know oftentimes 20 of your customers account for 80% of the profitability, and then the flip so you want to make these intentional decisions with your cash and your capital and and not, you know, not just relegate that to you know, to to sort of after the fact. Kind of thinking.
Marcia Riner | Profit Booster™️ (16:31):
Well, and I know that there's a lot of people that have this fear of taking on debt right? And they would prefer to use their cash rather than to go, put it on a credit card, or pay the credit card off immediately with the cash, and they got a 30 day window on it versus
utilizing the ability of capital, so that you still have cash on hand for those important opportunities. I'm not saying, you know, taking on debt is a good thing, but taking on debt may be a better thing sometimes than cash. Is that still true in your space?
Peter Kingma (17:09):
Well, we we so yes and no, right.
Marcia Riner | Profit Booster™️ (17:12):
And so let's let's.
Peter Kingma (17:13):
Let's use. Yeah, let's use the let's use the pandemic is a great example.
When that hit
all heck broke loose right? We had supply chains that were disrupted. You know, I think each of us in our own personal lives became supply chain experts so we couldn't get toilet paper. But you know, and we spent a lot more on transportation costs and other things. Well, so in response to that, you know, the the markets. Really kind of create a situation. We had free cost to capital
(17:43):
right? And so we got into this period. And I see this with big companies and small companies. We got into this period, where we just assumed that the cost of debt was, you know, was nothing, and that cash was free.
And so then we took on a bunch of debt. But you know you still have to service that debt. And that also limits how much more you can do. You know, there's only a a certain amount that you can actually take on relative to your revenue and your profitability.
(18:09):
But now we're in an environment where the cost of debt is
back up. And and if you've been following the fed, it's probably not going down anytime soon. Zoom Phone.
Marcia Riner | Profit Booster™️ (18:19):
Thank you.
Peter Kingma (18:20):
Going up?
So so that that sort of variable or that equation of, you know, should you take on debt is a nuanced one right? It really has to do with how much leverage do you already have? You know how how expensive is that debt? And and yeah.
Marcia Riner | Profit Booster™️ (18:38):
Came in.
Peter Kingma (18:38):
It always does. Yeah, you're always gonna factor that into your equation. But what I'm trying to spread the gospel on is, you know, the Ca, the cash that you're gonna generate from your internal operations. And let's just use a manufacturing example. We could apply it to services as well. But if you think about it, you know, if you're in a business that's that's selling something, you're gonna you know, it's the time that you put cash out to buy something.
(19:02):
and then you make something, and then you sell it. And then you collect that cash right? It's that cycle. And you want that cycle to be as fast as possible, because as that
then starts to churn off cash that actually turns off capital for your business. And that's what creates wealth, and that's what gives you the opportunity, then, to go reinvest, to do, expand? You know all those great things that that cash that you're gonna generate just from your own operations, is not. It's it's both the cheapest form of cash and capital that you're gonna find. Access to.
(19:35):
It also is a great barometer for the health of your business. You know, and we talk about profitable businesses can go bankrupt, you know, so it it will really point out where you have process failures, and where you may be also spending, you know, too much money on certain aspects, like collections, or like getting bills out, or or the like.
Marcia Riner | Profit Booster™️ (19:58):
Yeah, that's that's really that's and see. That's why that's why I wanted to bring you on today is because there's so many different nuances that we need to look at, and most business owners, at least in the smaller space, the under 10 million space they often are, you know, tied up doing this looking at? How do I get my company to to produce more? And where's the next customer? And stop, you know? Put out that fire and put out that fire where they're not looking at the nuances of accounting, because a
(20:27):
they don't know how or they don't like it, or it's very scary, and then they rely on an accounting team.
part-time full-time in-house outhouse to to make recommendations to them that they may not be getting so. The.
Peter Kingma (20:41):
Yeah.
Marcia Riner | Profit Booster™️ (20:41):
I wanted to bring you on. And really highlight the areas to say, look business owners, there's lots of opportunities
that cash allows.
And we need to make sure we're thinking of it as as an opportunity and making sure we're making good decisions with them.
Peter Kingma (20:57):
That's right, you know, and there are listed as a
I. I've been accused of bringing dinner parties to a halt when I talk about what I do for a living, because I love it. But I recognize that this isn't what you know. Most people go into business
because they're passionate about something else. Right? They're not passionate about accounting, or they're not passionate about managing these kind of things. And there are all these like terms that we throw out and and you know, metrics and measurements and all that, that. Sometimes we gloss over them.
(21:27):
So I you know this is what I tried to tackle in the book with humor is kind of understanding some of these seemingly you know, boring concepts. But, man, they're important to understand, you know. I'll I'll give you one example is when you talk about again a manufacturing environment.
you'll often hear a term called absorption accounting. And this is a concept of, you know, if you've got an asset, you've got a machine, you can. You can take the cost of that machine essentially and spread it out over the things that you're making with that machine, you know. You could take that cost and then divide that over the over, the output over the inventory.
(22:03):
and that has an effect of making your profitability look better.
But if you do that too much, if you're producing too much that way, you end up with too much inventory, and so that can then encumber your cash. And so it's it's just it's going into some of these somewhat seemingly dry concepts
(22:23):
and getting a good understanding, because it's it's, you know, as a business owner it's critical that you, you know that you at least consider these these concepts. Whether they're they're exciting or not. They're gonna they're gonna impact your business.
Marcia Riner | Profit Booster™️ (22:37):
And they're gonna impact it in one of 3 ways. Whether it's your your, the value, the the profitability, or the cash that you have in in the company for those opportunities and things that you wanna do with it.
that's why that's again. That's why this is so important. So when we look at this, if we were to say to business owners in the smaller space and say to them, You know, how do you do it. This is a little overwhelming. This is a little like, you know I I don't want to do that because I'm running a chiropractic office, or I'm I'm a plumbing company, and I got 6 trucks.
(23:16):
How do I? How do I? How do I? How do they get into this? How do they figure this out.
Peter Kingma (23:21):
Yeah, it's it's fun, right? Because at one level it seems so incredibly straightforward and simple.
Marcia Riner | Profit Booster™️ (23:28):
For some of us.
Peter Kingma (23:29):
Or you know, just if you take it at the highest level get people to pay you faster. Pay people slower don't hold as much inventory in the story. No need to buy a book. You you're done but it's the it's the trick of how do you actually do that given the business that you're in.
And so yeah, so you're right. So that so what I've done is, I've tried to outline all of the different stages of managing, and I start off with trade working capital, which is your receivables, payables, and inventory. And then I get into things like, you know, what if you have logistics, or what if you have
(24:04):
production? And then I get into things like, you know, what kind of metrics and incentives should you consider. Here's a here's a freebie or a good one here, you know. If you're if you're paying commissions to your salespeople on revenue, you might want to consider paying them on collected revenue.
Right? Because, yeah, then you start to get them involved in that. You know, negotiation upfront about what my terms are going to be, and they've got a vested stake in making sure, you know that they getting back to the customers, if for some reason they're slow paying. So it's just stuff like that. So I try and break down, you know, to your point of like, how do you get started? So each chapter kind of goes through a scenario, and then I have you know some best practices that you can follow as well.
Marcia Riner | Profit Booster™️ (24:47):
Good. So it's one of those easier red books because they're telling me stories of things that you're like. Oh, I didn't realize that right.
And and we know that many of today's counting people are fantastic at looking backwards and saying, These are the direct. This is what you should have done, or this is how we can do it. But finding those people that can say, Hey.
(25:08):
here's an idea. Have you thought about this
process? And it's a financial process in your business that you didn't think about before, because you're busy swinging the hammer.
And I think that's the partnerships that I love having books like yours that come to market that really educate the business owner to go. Huh? I didn't think about that because they didn't think about it until someone brought it to their attention.
Peter Kingma (25:36):
Yeah, you know, and if misery loves company
I spend. I spend my time working with very, very big, very well known companies.
and you know, for them. The issue is, they've got all these people spread throughout the organization that are making all these decisions. And you know the the people at the top don't really even know who's making all these decisions and that are tying up, you know, that could be encumbering cash So
(26:02):
so if misery loves company. Even the big guys are doing this. But I'll tell you what we also, I coauthored a study
and you can access that on my website. We'll give you that information as well. But where we looked at I think it was a thousand companies globally, and we we analyze those that perform better in the top quartile of cash performance.
(26:23):
and what we've got empirical evidence to show that when there is a downturn those companies are less susceptible to it. They come out of the downturn faster. They don't go nearly far down as as the others, and these and there could be differentials on profit and revenue between them. But it's the cash element that's that's the difference maker, right? And so that's this. That's if if there's any takeaway from this discussion
(26:47):
today. It's that, you know, cash is the lifeblood of a business. And because it's, you know, that's what you can actually invest.
You know. Buy stuff with pay, people with not the not the promised revenue or not the inventory that's sitting on the shelf, even though it has value. You still have to sell that and liquidate that at some point.
Marcia Riner | Profit Booster™️ (27:09):
Exactly exactly. And I think that you know, having having that 3 legged stool, as you, as you said in the beginning to really focus on the 3 areas of it adds so much more to the company. And and when we talk about opportunities.
listeners we're talking about, maybe it's an opportunity to grab you know, inventory at a lower price or or products to build at a lower price. Maybe you can make that investment
(27:36):
in new equipment. Or maybe you can make that investment in a new market, or strategy, or or hiring a better person, or invest in the people that you have keep great people. It's all that moveability
that when you're strapped, or you're thinking, here's promised revenue. Or here's product that I haven't sold yet. It. Just it just doesn't give you any wiggle room that that you really wanna have. And I think, you know, having that
(28:11):
flexibility and being agile and nimble in business creates so much more
security, safety, comfort, calmness, no rough tossing attorney at night, when you know you have something in the in the, in the checking account to to make, you know, make decisions with.
Peter Kingma (28:32):
Right. And you know. So so while I we've and we've largely been talking about a a you know scenarios where somebody's making products right and it. And admittedly, that's
the fictitious company I created in there makes products. But then I do spend the last chapter talking about how this could apply to services, business, professional services, businesses. You brought up healthcare. And my goodness, that so the the process around
(28:59):
getting paid or the claims submission process is often referred to as revenue cycle management. And so I kind of try. You know, you could write volumes on that concept alone. But I try and break that down and talk about. You know what the payers are going to require admissions process. If you're a doctor, things that you might want to consider doing on the front end. So there are kind of
(29:19):
practical tips here for services, businesses, professional businesses as well. That you know that it's not just a manufacturing company.
Marcia Riner | Profit Booster™️ (29:29):
Oh, a hundred percent. Just because you're selling a product or a service, there's still there's still levers that you can pull to make these arrangements come out, you just if you're selling products. You've got a cost of good sold that are more impactful than the service. But it's still in services. You still have a cost of goods sold. They're just not as high on the on the the P. And L. And the balance sheet as as the other company, but there's still so many levers that you can pull
(29:57):
if you're aware of them.
Peter Kingma (29:59):
That's right, and if you are, you know.
if you're a professional services
like you know, lawyers, accountants,
you know, consultants oftentimes and again
disclaimer. Here I'm not an accountant, but oftentimes you will be. You will set up something called, you know, cash accounting versus accrual accounting. So that means you're paying. You know you're paying your taxes based on you're paying up based on the cash that you have in hand. If that's the case.
(30:27):
then it's even more important for you to focus on cash, because that's the cash
that's the cash that you actually have versus, you know, being able to leverage accrued revenue. If you're gonna go out and borrow, or or something along those lines, that's the cash that actually gets redistributed to the printer.
Marcia Riner | Profit Booster™️ (30:43):
So hmm.
Peter Kingma (30:44):
So yeah, so we talk about that. We talk about how it impacts. You know, professional services as well as those that are, you know, making and selling stuff.
Marcia Riner | Profit Booster™️ (30:52):
Awesome.
Well, Peter, you said Cash is king right in the in the title of your book, and I believe it. 1,000. Where can listeners find out more about you and the book and the ideas that you share.
Peter Kingma (31:06):
I love that you asked me that. Thank you. Peter kingman.com is my website, and you can download the introduction to the, to the, to the book. You can also, I post all of the other things. You know different things. I've written different podcast interviews and the like. So there's more content there that you can access as well.
(31:27):
You know. And then the book is available. You know, everywhere, Barnes and noble target Amazon. All that sort of thing.
Marcia Riner | Profit Booster™️ (31:33):
Love it, love it as a fantastic title. So kudos to you on that one. But I think listeners, you know.
we're not. Gonna we're not gonna drink from a fire hose and become an accounting expert on business. But if you can get
one new idea
and implement it into your business.
(31:53):
Those little incremental changes can make so much more for your company than you ever imagined. So my philosophy is like incremental changes and big results right. And so
don't think that this is gonna be this
over. You know.
you're gonna sleep overnights, and you're gonna have all these challenges. And then you're gonna turn your company upside down. It's just the little itty, bitty things.
(32:18):
But making those changes can improve your company, value
the the cash that's flowing through the opportunities you can have the value of the company, the relationships with your customers, I mean, I can go on for days about the benefits that, having proper cash flow in. Your company can can do for you. So I encourage you. Go, get the book.
(32:41):
read it, grab an idea today, grab another idea next month or next quarter and just start implementing. I I know that you'll look at it in in in the rear view mirror and go. Wow! That was the best investment of my time.
Alright! Thanks for listening. I hope you found a couple of ideas to put into your business that will help you become more profitable.
(33:04):
As I mentioned before. If you want to supercharge your business, go ahead and download my new profit booster playbook packed with 3 strategies and the actual steps that you can use to make this your most profitable year ever.
and go grab it for free@boostingprofit.com.
and Peter and I would love to hear your questions.
(33:25):
Tell us what what idea you want to do, or maybe what challenge you have? Just tell us in the in the in the comments, what it is that you've taken away from our story, and what kind of idea you're gonna implement? We would love to comment back on it and maybe direct you in the right path
while you're at it. Please subscribe.
And you want to catch profit with a plan on any of your favorite podcast players. We're looking forward to more great profitable information on next week's show. So until then, make your plans and profit with them, thanks. So much, Peter.
Peter Kingma (33:55):
Thanks, Marcia, great to be with you.
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