Take No Prisoners: A No-Holds-Barred Approach to Corporate Excellence

Chapter Nine. Keeping the Balance Sheet Balanced

In a troubled situation companies are always hunting for cash and use the balance sheet as a source of cash that may not be readily available from a lender. In a nontroubled company, there is a tendency over time to get sloppy with balance sheet items such as receivables, payables, and inventory, which can be “milked” to reduce loans or provide cash for other endeavors, such as growth or reducing debt. Companies are often reticent to be tough on these areas because once they are tight there is a need to keep them tight to avoid using cash once again. There is also a reluctance to reduce old inventories due to the P&L loss effect of writing off old or obsolete inventory in a timely manner.

The steps ...