Cash Rules Everything Around Me

One of our vendors went out of business a short while ago, and our office was abuzz with speculation about why this seemingly good company went under.

“What did them in?” one of my peers asked during a conference call in an attempt to get the scoop or the dirty details.

“What do you think?” my boss asked rhetorically and facetiously, and, without having any more information than we did, he informed us why the vendor went out of business. He said, “They didn’t drive their sales and they didn’t control their expenses. Why else would a company go out of business?”

Sometimes when I am playing golf I intentionally try for a complicated miracle trick shot that even a pre-scandal Tiger couldn’t pull off. I think to myself, “I’ll just hook the ball around this tree, and hit it hard enough to make it over that pond, and the ball will land somewhere in between those two sand traps right in front of the green.” In golf, this is called “trying to get cute,” and it never works.

As a manager, I know I sometimes try to get cute and I get caught up in obscure and complicated analysis of the business. In retails sales, everything – from number of transactions, to the average size of the transactions, to number of items per transaction, to average profit per transaction – can be measured. Of course, good analysis is a tool that helps a manager diagnose internal strengths and weaknesses. But a manager can get lost in the woods, or worse, end up at the bottom of a pond like our bankrupt vendor, if he spends too much time reading into the minutia of the business.

This week I am reminding myself that, at the end of the day, owners don’t take metrics to the bank. They take cash to the bank. They don’t send me metrics in my paycheck. They send money. And over time, the company can only send me money in my paycheck if there’s enough of it left over from sales after paying all the bills and providing a long term return to the owners on their investment.

The real task of a manager is to ask, “how can I make the company the most amount of money or save the company the most amount of money today?” The rest is for business schools.