ABSTRACT
This chapter focuses on cash flow. It explains why cash flow is so important to a business and how to accelerate it. Building high-velocity cash flow is one key to constructing a great supply chain. Cash flow begins with setting the right pricing, echelon by echelon, across the supply chain network. Product pricing leads to revenue on the income statement, which in turn leads to margin, and ultimately, to net profit, which generates cash. Cash is consumed operationally by inventory, accounts receivable, and other things as recorded on the balance sheet. The cash flow statement records changes to cash flow from operations, from investing, and from financing. This chapter also details how to budget for financing the supply chain construction project. By the end of this chapter, you will understand how cash flows into and out of the balance sheet, how cash is replenished from income statement profit, how changes to cash are tracked on the cash flow statement, and how to estimate extra cash needs for your supply chain construction project.
