Time Is Money

Ancient Greek writer and orator Antiphon “Of all expenditures, time is the most expensive”, A century after Antiphon, Aristotle’s successor Theophrastus “Time Is a Costly Expenditure”, Thomas Wilson in his “A Discourse Upon Usury (1572)” They say that time is of great value”, Francis Bacon in the chapter “The Temperance” of Essays (1625) “Time is the measure of work as money is the measure of goods, work that is not quickly accomplished costs money” and Benjamin Franklin, “Advice to a In his work titled “Young Tradesma-Written by Old One (1748)”, he emphasizes “Time is money” by saying “Remember that Time is Cash”.1

This phrase is attributed to Benjamin Franklin as an aphorism, as Benjamin Franklin used it exactly as Remember that Time is Cash.

“Time is Money” to Cambridge, Longman and Oxford dictionariesAccording to 2 , respectively, “Time should not be wasted because it will be used to make money”, “Wasting time or delaying something causes loss of money”, “Because time is a valuable resource, it is good to get things done as quickly as possible” and “Time is money”. In the TDK dictionary, it is defined as “time is very valuable, it should not be wasted”.

So how can time be cash?

As long as blood flows, man lives. If companies are a human body, the “cash” is blood circulating in the body. cash flow like blood; keeps the company alive. The cash flow problem makes it difficult for companies to do business and may even cause them to close (bankruptcy). All companies must pay attention to the factors that affect their “cash flow” in order to survive. At this point, if “Cash is King.” On the other hand, correctly planned and correctly managed , in short, correct logistics represents the “power of the king”.

Veins are the pathways of the body and carry blood to every part of the body. The heart is the body’s warehouse and receives the blood circulating in the body, cleans it and sends it back to the body. The blood circulating in the veins and heart of the company, in fact the goods of that company, that is, the most important material asset, that is, the capital connected to its stocks, and the costs from the production of those goods to the use of the customer are actually the cash, that is, the money of that company. If the blood does not reach the parts of the body at the right “time”, if the stocks cannot be delivered “on time” or if they coagulate while being delivered (cost increase), the company’s blood flow, ie cash flow, becomes more difficult.

Companies earn money by managing logistics time (TIME) correctly thanks to the right logistics, or lose money because they cannot manage logistics time (TIME) due to incorrectly planned and mismanaged logistics.

Every money earned, that is, cash entering the company, facilitates the “cash management” of the company (cash flow accelerates), while each lost money, ie cash out or not entering the company, makes the “cash management” of the company more difficult (cash flow slows down and the company; has difficulty or cannot pay debts).

While companies strengthen the value of the money they earn by managing the cost in relation to time with the right logistics, otherwise, difficult days may begin for the company if they cannot manage time and cost correctly due to logistics. Logistics time is not shipping time.

Logistics time is the sum of the time from supplier to customer, including shipping. The company’s logistics affect the time it takes from sourcing resources (goods and/or services) from suppliers to making products (goods and/or services) available to the customer.

Cash Cycle3 shows the cash situation in the process from suppliers to customers as DAYS. Shorter Cash Cycle means better cash management. An increase in the Cash Cycle indicates that the company is (could be) experiencing cash problems.

The cash-strapped company may find different solutions to keep its business and/or pay off its debts. This company, for example, by organizing campaigns such as obtaining a loan from the bank or postponing its commercial debts or selling its assets under value or transferring its trade receivables to another financial institution at a cheaper rate or making sales discounts, respectively, to pay unnecessary bank debt and interest, or to waive the income that should be, or to get into trouble with the suppliers. or by methods that may have negative effects, such as a deterioration in relations with suppliers, or inventories being sold below market value, or deprivation of the required profit. On the other hand, this company manages the logistics time correctly, thanks to the right logistics, and thus, by shortening the Cash Cycle, cash is received from the customer in a shorter time, that is, by completely drying the swamp, there will be no mosquitoes again. For example, if this period of 50 days can be reduced to 45 days with logistics improvements (Trade Payable Period, Stock Turnover Period and / or Trade Receivables Collection Period decreases while remaining constant), cash enters the company 5 days earlier and “cash” management becomes easier.

If the companies cannot offer their products to the use of the customer at the place, time, amount (quantity) and manner (quality) that the customer wants, the customer may pay late or not make the payment (the customer’s natural right), and as a result, cash inflow to the company and thus cash management becomes difficult. Your products; It can only be provided with the right logistics in the desired place, time, amount and form. Customer’s late payment or non-payment due to logistics problems (delay, damage, etc.) adversely affects the Collection Time of Trade Receivables4 and thus the Cash Cycle, and as a result, the company experiences a cash problem.

Company’s logistics, Stock-Keeping Time 5 effects. The amount of stock to be calculated and calculated (essentially an estimate), logistics-related activities (shipping time from supplier, returns to supplier due to damage or incompleteness in transportation, storage (size, duration of transactions, door-to-door time, quantity), distribution from the customer due to damage or missing returns, delivery time to the customer, sales forecast, etc.) are directly affected. If logistics is not properly planned and managed, Stock Holding Time may increase. Increased Stock-Holding Time negatively impacts the Cash Cycle and as a result, the company has a cash shortage.

Inventory management is not only the ability to calculate (estimate) the amount of stock to be kept, but also the correct preservation of stocks in terms of quality (solid) and quantity (exact). The company loses money as stocks are not properly maintained due to misplanned and mismanaged logistics.

Due to misplanned and mismanaged logistics (delay, damage, loss, etc.), the company loses money if Inventory Carrying Cost6 and Cost of Sales7 and hence Gross Profit is adversely affected. For example, with a 1% improvement in the logistics cost of one good, at least 0.20-0.25% improvement in the total cost of the product can be achieved.

The company, whose Inventory Carrying Cost and Cost of Sales and hence Gross Profit is adversely affected due to misplanned and mismanaged logistics (delay, damage, loss, etc.), loses money.

Existing and potential customers no longer receive goods and / or services from the company due to the late delivery, wrong location, incomplete, damaged delivery due to incorrectly planned and mismanaged logistics. In this case, the company loses money because its revenue decreases.

Misplanned and mismanaged logistics; sales and management costs related to sales, order fulfillment rate, distribution cost, timely delivery, delivery time, product quality (solid, complete), customer response time (logistical flexibility), production (production stoppage due to understocking) and sales (sold no to the customer because the amount of stock is less than necessary) affects negatively and the company loses income, that is, money.

Inventory that is not sold because it cannot be tracked is not only a waste, it also takes up significant storage space and complicates things in the warehouse (if orders are not shipped on time or sent to the wrong place), the company loses money.

Risk management in logistics processes ensures that logistics costs do not increase (reduction or absence of possible compensation payments or less insurance premiums) and logistics time is not prolonged. Otherwise, the company will lose money as SG&A will increase by8.

Guarantee payments for damaged goods due to logistical problems, payments (waste of time) or penalties for necessary official transactions due to “incorrect” arrangement of invoice or bill of lading & waybill or export documents, unfulfilled orders (back order, sell-off) and goods delayed or damaged The company loses money as SG&A will increase due to compensation payments to the customer, compensation for possible “currency loss” due to delayed delivery.

Urgent orders from sales (99% of them are not urgent in fact, and unfortunately the sales team uses the word “urgent”) or emergency orders from logistics will increase distribution costs, resulting in increased SG&A and the company losing money. Returns due to logistics problems (damage, missing) will increase distribution costs, so SG&A will increase and the company will lose money as a result.

The right logistics ensures that the right information is available. With the right information, the right decision (inventory, ordering with the supplier, anticipating the demands) is made. If there is no correct information, the decisions to be made will not be correct, which leads to loss of money.

Every company that loses money, that is, has cash problems, needs more Working Capital to continue its day-to-day operations. The need for more Working Capital means that money comes out of the company as interest payments (loss of money) and less money the company allocates to strategic activities (investment, business development, more sales, R&D, etc.).

The fact that the right logistics infrastructure (warehouse, transportation vehicle, software, equipment, materials, etc.) will be provided by making less investment expenditures with the right logistics management or the extra money to be spent for the investment as a result of outsourcing for some of the logistics activities remains in cash in the company, making cash management easier.

Thanks to the right logistics management (with less investment expenditure, the right logistics investment and the increase in revenue through the right logistics), the ROI 9 for logistics infrastructure accelerates and this facilitates the company’s cash management.

The right logistics facilitates cash management by reducing the distribution (warehouse, delivery) expenses of the company, and even with the right logistics, millions of liras of promotional spending may not even be needed (the customer can share their satisfaction on social media), so that the money to be spent on promotion remains cash in the company, making cash management easier.

Proper logistics reduces the amount of inventory in the company’s assets (provided the right amount of the right SKU is present), resulting in a higher ROA10 even if sales never change.

Logistics management is crucial to the company’s cash flow and financial metrics associated with cash flow. Proper logistics makes it easier for the company to manage cash, while wrong logistics makes cash flow more difficult.

Companies make money (not lose money) by managing “time” and “cost” correctly, thanks to the right logistics. Making money for the company means keeping the cash for the company. Otherwise, incorrectly planned and mismanaged logistics cause companies to lose money (loss of customers, increase in costs), and as a result, cash management becomes difficult.

With the right logistics, companies can improve both the financial management (financial metrics) and the cost of the product by influencing the “logistics time” and with it the “logistics and direct or indirect “costs”.

As the experts who most articulate and use financial metrics, finance managers must insist that the company’s logistics (planning, management, control) be correct for sustainable financial performance, rather than simply extend maturity to suppliers solutions. Because only extending the payment terms to suppliers causes the desired and targeted supply chain and customer-centered business model philosophy not to work properly.

Logistics professionals must plan and manage logistics “correctly”, knowing that they do not just carry or store anything from one place to another, but actually directly affect the company’s finances.

  1. “The Oxford Dictionary of Proverbs, page 502” and “The Enigma of Time is Money”
  2. https://dictionary.cambridge.org/en/s %C3% B6zl %C3% BCk/english/time-is-money , https://www.ldoceonline.com/dictionary/time-is-money
  3. Cash Cycle = (Trade Receivables Collection Period + Stock Turnover Period) – Trade Payables Payment Period
  4. Trade Receivables Collection Period = (Trade Receivables / Net Sales) x 365 days
  5. Inventory Turnover Time = (Inventory / Cost of Sales) x 365 days
  6. Inventory Carrying Cost; It includes the cost of stocked goods and alternative costs for it, storage, tracking and traceability of the goods, insurance, taxes, possible losses, wastages, loss of quality in the goods. Due to problems directly related to logistics such as estimation error, losses, damages, extended delivery time from the supplier, extended delivery time to the customer, less or more stock than necessary may lead to an increase in Inventory Transportation Cost.
  7. Costs associated with logistics (shipping, inventory, storage, packaging, etc.)
  8. SG&A (Sales, General and Administrative Expenditures)
  9. ROI (Return on Investment)
  10. ROA (Return on Assets)