Tales of Cash Conversion Cycle Greatness with CJ Gustafson

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Jul 29, 2024

CJ Gustafson, an expert in cash conversion cycles, shares his career insights and real-life success stories. He discusses optimizing cash flow, revealing how he reduced Days Sales Outstanding from 55 to 37 days. Using examples from companies like Starbucks and Chewy, he highlights innovative cash management strategies, including influencer marketing and gift card systems. CJ also delves into dynamic pricing tactics in the aviation industry, showcasing how these methods can drive business growth and improve financial agility.

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ADVICE

Change Payment Terms

Change your customer agreement's payment terms to something better for you.
See who pushes back; it's often less resistance than expected, treat it like A/B testing in finance.

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Encourage ACH and Use Lockboxes

Encourage ACH payments and convert customers away from physical checks.
Set up a lockbox with your bank to speed up check processing and reduce manual work.

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Renegotiate Payables

Renegotiate payables for better terms, especially upon software contract renewals.
Ask for quarterly payments instead of annual upfront; it's an easier lever than price.

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In this solo episode, CJ does a deep dive into cash conversion cycles, telling listeners what he’s learned about them, sharing real-life tales from his career, and explaining how certain companies are excelling at theirs. CJ starts by breaking down how he got his company’s Days Sales Outstanding (DSO) down from 55 days to 37 days (a 33% improvement) and Days Payable Outstanding (DPO) up from 35 days to 47 days in the course of a year. Then he talks about how he achieved this through three big changes that he made, before delving into inventory management. Listen in to hear the stories of companies who have perfected the art of the cash conversion cycle and the dynamic methods they use to manage their cash inventory, their accounts receivable, and their accounts payable.

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SPONSORS:

Mercury is the fintech ambitious companies use for banking and all their financial workflows. With a powerful bank account at the center of their operations, companies can make better financial decisions and ensure that every dollar spent aligns with company priorities. That's why over 100K startups choose Mercury to confidently run all their financial operations with the precision, control, and focus they need to operate at their best. Learn more at mercury.com.

Mercury is a financial technology company, not a bank. Banking services provided by Choice Financial Group and Evolve Bank & Trust®; Members FDIC.

NetSuite provides financial software for all your business needs. More than 37,000 thousand companies have already upgraded to NetSuite, gaining visibility and control over their financials, inventory, HR, eCommerce, and more. If you're looking for an ERP platform ✅ NetSuite: https://netsuite.com/metrics and get a customized KPI checklist.

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@cjgustafson222 (CJ)

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TIMESTAMPS:

(00:00) Preview and Intro

(01:30) Sponsor - Mercury | NetSuite

(03:43) The DSO and DPO Improvements CJ made

(05:16) Changes to the Off-the-shelf Customer Agreement

(06:18) ACH payments

(09:25) Renegotiating Payables

(11:45) A Note on Inventory Management

(12:35) The Innovative Way CJ’s College Professor Delayed Payments

(14:53) Sponsor - Maxio | Planful | Leapfin

(17:58) Gymshark’s Pre-sale Drop Hack

(20:43) Starbucks’s Gift Card Program

(23:34) Chewy Pet Food’s Subscription Model

(26:11) Ferrari’s Customization and Their Cash Conversion Cycle

(27:58) Virgin Airline’s Dynamic Pricing Strategies & Creative Financing

(30:54) Wrap

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