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Money Maps, illustrating topics such as where profits come from.

A lot of companies today are governed by politics and power. They reward people who curry favor with their superiors and who build behind-the-scenes alliances. Gossip and mistrust are rife; common objectives get lost as individuals scurry to ensure their own advancement.

As we’ve shown, the financial report cards of business are partly reflections of reality. But they’re also—sometimes very much so—reflections of estimates, assumptions, educated guesswork, and all the resulting biases. (Occasionally they reflect outright manipulation as well.) The folks in your company’s finance organization know all this, but many of them haven’t done a good job of sharing their knowledge with the rest of us

Want to manage accounts receivable more effectively? DSO is not the only measure to look at. Another is what’s called the agingof receivables.

cash conversion cycle can be shortened by all the techniques discussed in this part: decreasing DSO, decreasing inventory, and increasing DPO

The cash conversion cycle gives you a way of calculating how much cash it takes to finance the business: you just take sales per day and multiply it by the number of days in the cash conversion cycle.

Dun & Bradstreet rating. D&B bases its scores, in part, on a company’s payment history

But what about the “soft” costs? A company that delays payments may put a key supplier out of business. It may find that suppliers are raising their prices to cover the cost of the additional financing they must line up. It may face slower delivery times and even lower quality—after all, the suppliers are likely to feel squeezed and will have to cope as best they can. Some suppliers may even decline the company’s business.

cutting just one dayout of the DII number—reducing it from seventy-four days to seventy-three—would increase cash by nearly $19 million

When business is good, the goal makes perfect sense: keeping unit costs down is simply a way of managing all the costs of production in an efficient manner. (This is the old approach of focusing only on the income statement, which is fine as far as it goes.) When demand is slow, however, the plant manager must consider the company’s cash as well as its unit costs. A plant that continues to turn out product in these circumstances is just creating more inventory that will sit on a shelf taking up space.