Golf is a funny game. The premise is simple. Beginning at the tee, hit the ball into the cup at the other end of the fairway in as few shots as possible. Unlike baseball, the ball doesn’t move while you swing at it. Unlike basketball, people aren’t yelling and waving their arms while you concentrate. And, unlike football, no one is ready to do you bodily harm during your backswing. Yet, it is a very difficult game to play consistently well. (See the graphic at the end of this post.)

After decades of playing decent golf, I decided to entertain folly and contacted a local golf instructor to help me with my swing. At an epiphany moment during my lesson, this story came to mind:

Scenario:

A local business is experiencing cash flow problems. Profits are down, but the company is still in the black. According to the owner, they’ve never been busier, but the line of credit has nearly reached its limit. The owner calls on us for help.

Solution #1:

After reviewing the income statements, we determine that sales are indeed up by 10% over the previous year. Our analysis of the income statement shows that the company’s cost of materials has increased as a percentage of sales, causing the gross margin to slip by 3%. However, upon analyzing the company’s balance sheet, we find that accounts receivable are taking an average of 10 days longer to collect and that inventory has grown from 60 days of sales on hand to a current 90 days. The result is less profit, more cash tied up in assets, a higher debt load, and more interest expense.

Solution #2:

Discussions with the owner reveal that prices were cut by 5% to gain a bigger share of the marketplace. So, while sales are up by 10%, the volume of activity is actually up by 15%. The result is smaller margins on increased sales. As the company became more aggressive with its pricing, it also extended credit to customers with higher credit risks, leading to a longer collection period. Salesmen insisted on having inventory in stock for all sales. Slowly, but surely, inventory had grown by 50% over the previous year.

Now, what on earth could have brought this to mind while hacking 8-irons on the driving range?

As I hit ball after ball, the instructor would watch a few swings and stop me to make corrections to my posture, my alignment, my pivot, my hand position, the position of the ball. (My gosh! I thought I was a fairly decent player, but I felt like a basket case.) One thing, though, that he harped on for several minutes was that I was leaning forward during my backswing. He gave me several tips on how to keep my weight back, my posture straighter, etc., all in an attempt to keep me from leaning forward.

After standing there watching, he finally had an “Ah-Ha!” moment. He noticed that it was nearly impossible for me to keep my weight back because my left knee was bending forward instead of towards my right knee. That simple move caused my weight to fall forward. We made the correction and my swing began to improve.

This was the epiphany. Only by observing, asking questions, analyzing, and tweaking can we get to the root of the issue. Many situations present themselves with symptoms that need to be corrected, but we often treat the symptoms instead of looking for the root cause.

In my case, it was an incorrectly bent left knee. In the situation above, it was an aggressive sales strategy without proper guidelines and controls.

Stopping with the steps in Solution #1 may have led us to advise the owner to reduce inventory, find alternative suppliers, and send customers to collections. However, in short order things would have been right back where they started.

By asking more questions, watching how things were done, and analyzing financials with our SCOPE-It software tool, we were able to get to the root cause of the problem and make corrections that would have a lasting impact. With various team members from sales, operations, and finance assembled togethere, we were able to show the cash impact of the changes that had occurred.  We then strategized with them how best to meet the customers’ needs, but to also minimize the cash requirements of carrying accounts receivable and inventory.  Pricing strategies were examined and we were able to quantify the relationship between price decreases and customers gained. With everyone more aware of the financial impact and the effect on other departments, the group was able to form a working plan with specific implementation steps. They owned it.

I, too, have specific things I’m working on to develop a consistent swing. Now, if I could just get my putts to go in.