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19 Tips for Better Cash Flow Management: Cash Management Is More Important than Ever

Traditional Practices May Not Be in Your Best Interest Today

By David Hetherington

This article was originally published in Book Business Magazine on December 1, 2009 and has been updated accordingly.

Effective cash management is critical to the health of any business, but the recession and associated credit crunch have made paying close attention to managing cash more important than ever. Tight credit, increased bank focus on compliance with existing loan covenants, and revenue streams with less predictability have made it essential that businesses pay more attention to cash inflow, outflow, and retention.

Contrary to popular belief, cash management is not the sole province of the finance department. It requires the cooperation and participation of every major functional area of the organization.

More importantly, the new emphasis on cash management may require that certain long-cherished beliefs about the “right” way to manage the business be reexamined, and decisions based on lowest unit cost take a back seat to actions that conserve cash reserves. Here are some of your options.

Paper

With the possible exception of compensation and benefits expenses, inventory investment is likely to be a publisher’s largest single drain on cash.

Inventory takes two forms: raw materials (e.g., paper) and finished goods. While building raw-material inventory may be valuable in times of tight supply and rising costs, it is a questionable strategy under current market conditions.

Finished Goods Inventory Strategies

Cash Discounts

Staffing

Capital Spending

Receivables Management

Royalties


David Hetherington is the vice president of global business development for Books International, a leading provider of U.S. and international book manufacturing, print, and digital distribution services for the book publishing industry.

Mr. Hetherington’s portfolio reflects a broad range of responsibilities including vice president of manufacturing, and he was subsequently appointed vice president of financial planning for Simon & Schuster’s Higher Education Group. In addition, Mr. Hetherington held other key responsibilities in finance, operations, and sales at Reader’s Digest, Wolters Kluwer Health, Columbia University Press, and Baker & Taylor.

Prior to joining Books International, Mr. Hetherington served in senior roles in the book publishing software industry including chief operating officer of Klopotek North America and as chief marketing officer for knk Software LP.

In addition to his current role at Books International, Mr. Hetherington serves as an adjunct professor and member of the advisory board for Pace University’s Graduate School of Publishing, sits on the board of directors for the Book Industry Study Group, and serves on the program committee for the Book Industry Guild of New York.

Mr.Hetherington is a frequent speaker at publishing industry events across the globe and has written articles for Book Business Magazine as well as Springer’s Publishing Research Quarterly.

In the event you have any questions about the material contained in this article, please feel free to reach out to Mr. Hetherington at d.hetherington@booksintl.com or contact him directly at (908) 458-5928.