All companies want to expand at some point during their growth history. Aggressive expansion and diversification initiatives require more planning and require significant increases in cash flow to fuel those plans. Recently, I spoke with Craig Mezik, a Senior Financial Management Executive who shared a powerful story on how to simultaneously increase cash flow, improve business practices, grow sales, and change thinking as well as corporate culture.
Craig said, “A new VP of Finance was hired from GE who was charged with identifying and addressing strategic financial issues that would facilitate change in the company culture, create a problem solving and process improvement team structure, and improve profitability and cash flow. The company had $12 billion of trade accounts receivable and $6 billion of saleable inventory on the balance sheet. The VP of Finance wanted to create teams to review the management of those assets, evaluate and recommend process changes, implement them, and increase cash flow.
“A year earlier I prepared a competitive analysis of our business unit’s inventory turnover to best in class companies and major competitors. I shared my earlier analysis and I updated it to include a competitive analysis on accounts receivable. My new analysis showed our inventories and accounts receivable balances grew to $18 billion but our inventory turnover and days sales outstanding were well below best in class and that of our major competitors. The VP then asked me to identify all key financial and operational managers who needed to be pulled together to form two performance improvement teams. The executive leadership committee approved the formation of the two teams.
“I was assigned team leader of both process improvement teams and I arranged meetings to present my analyses and set each team’s goals, action items, deliverables, and timelines. Initially, the Business unit leaders and subject matter experts were resistant and apprehensive since they were not familiar with the competitive benchmarking studies performed in our industries, were operating with outdated perspectives, and were untrusting of Corporate Finance leading the effort and the teams.
“I established business unit sub-teams to review the benchmarking studies, internal processes, identify strengths and weaknesses, and KPI’s to measure business unit performance against best in class companies and major competitors. Each sub-team crated balanced scorecards and KPI metrics, calculated their historic and current performance measurements, set short-term and long-term targets, and developed action plans to improve practices and procedures that would drive metric improvement. The two process improvement teams created a corporate inventory and accounts receivable scorecard for tracking and reporting ongoing performance against targets, benchmarks, and competitors.”
Bottom Line? Craig engineered a $350 million cash flow improvement within the first six months by reducing days-sales-outstanding and increasing inventory turns.
Watch full video interview below.
Contact Craig via LinkedIn or Career WebFolio.
Fred Coon, CEO
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