THE GOAL OF THIS BOOK HAS BEEN TO SENSITIZE you to cash-flow thinking through the use of the
seven cash drivers. At this point you should have a fairly good grasp of how cash—actual cash, rather than accrual-based accounting value—fuels an enterprise, and how cash flow can be shaped to meet
different business needs.

Management’s most basic job is to ensure that a company does not run out of fuel. Beyond that basic task, every other significant management effort has to be undertaken with an awareness of the impact on the fuel gauge, the cash-flow statement. In this model, the cash drivers are the basic internal fuel controls.

If you speed up by growing sales faster, you will burn your fuel faster. Letting the accounts-receivable days drift upward is like siphoning off fuel from your car to help another driver who promises to give it back. If accounts-payable days increase, you have just the reverse: Suppliers are allowing you to siphon fuel off from them, which, of course, you promise to give back sometime. If inventory days start rising, it’s like taking fuel out of your tank and storing it in 55-gallon drums up north in the woods behind your vacation place. The fuel is still yours, but it’s not readily and economically usable to top off your tank for tomorrow’s long road trip.

Taken From : Cash Rules