Sometimes the best way to explain what we do is to tell the stories of businesses we’ve helped in the past.
Workforce Services business recovers from Cash Shortage
This small/medium Workforce Service business had multiple divisions including Training, Education, Apprentice placements and Apprentice Network services. They had been in business for over 20 years and had built a solid Balance Sheet, however due to an extended downturn in their primary geographic and industry customer base for Apprentice Placements their board needed better information about the financial impact if the downturn continued.
Monthly Board Reporting was updated to improve transparency of operational performance by division, which highlighted revenue/profitability issues with other divisions. These reports also corrected the financial position of the business, which had not been reported correctly since a business acquisition in the prior year.
Cash Forecasting was introduced which showed declining cash would be problematic within 3-6 months.
The business was effectively asset rich but cash poor – it needed to restructure to operate sustainably, but did not have enough cash to do so. We completed the following Balance Sheet Restructure and additional tasks:
- Bank funding request (including preparation of 3-way forecasts) resulting in a secured facility sufficient to cover 6-9 months cash requirement during operational restructure.
- Negotiated sale of property to repay bank facility and provide a suitable cash buffer for operations.
- Financial Due Diligence for a voluntary merger/takeover of Business A by a larger group.
Result: The Balance Sheet restructure provided the cash necessary to improve profitability to a level that made the business attractive to merge into a larger workforce services group. This merger gave the business additional strategic and operational depth which helped it complete its transition back to profitability and sustainability.
High-tech manufacturer improves budget
This large listed Manufacturing business produced their high-end product range of measurement equipment in a single factory, with an integrated management team covering Manufacturing, Purchasing, Logistics, Engineering. The production process was extremely complicated and the products took between 4-16 weeks to assemble, with many orders for the most expensive machines involving serious customisation.
Because production lead times were so long the customer order pipeline was know well in advance, meaning revenue forecasts were reasonably reliable. The product costs were only budgeted using standard product costs, which meant they missed additional customisation costs and were not accurate for variances in purchasing (price and quantity), logistics handling/storage, and freight costs. Monthly discussions of financial performance typically glossed over these (sometimes quite high) variances because we can’t control them so it doesn’t matter.
We built a new Budget model which rolled up the missing cost assumptions into the Cost of Sales, based on a combination of historical variances as well as what could be estimated based on the forward order book.
Result: The new budget model generated more meaningful discussion of variances which allowed the management team to target areas for improvement.
Workforce Services business recovers from severe business interruption
This niche Labour Hire/Recruitment business was small but growing rapidly and had expanded into several states based on securing a number of blue-chip clients. It had suffered a major business interruption due to a major client going into administration. With a large debtor balance unlikely to be paid, the focus was on determining business viability and strategy for trading through the difficult times ahead.
Strategy was planned with the management team, with priorities to:
- Cash Forecast – get accurate short-term (12 week) cash forecast quickly;
- Action debt recovery via Administrators (as much as possible);
- Debtor Management – Tighten up other outstanding customer debts to improve collection days, including training operational staff to deal with new customer terms;
- Review Operational Expenses – implement KPI reporting to track operational performance by site and identify cost savings across the business;
Result: While the business interruption was severe, the strategy successfully avoided it becoming a catastrophe for the business. It reduced substantially in size but was able to continue trading.
Wholesale business improves cash management
This small Wholesale business imported goods from China and distributed across Australia and internationally. Business had been stable for a number of years but recent investment in new product development meant cash was beginning to drop with no clear picture of when it would be a problem or how to arrest the decline.
A Cash Management Review showed some clear short and long-term improvements should be made in:
- More frequent utilisation of Supplier Financing facilities offered by large customers, resulting in daily availability of cash;
- Improved Debtor Management processes including automated systems for customer reminders and monthly statements, resulting in an improvement in payment days of smaller customers by 10%;
- Implementation of weekly 12-week Cash Forecasting, which drove better decision-making about project investment decisions.
Result: The business was able to plan the timing of several major business improvement projects to minimise pressure on cash reserves. This helped position the business well for an unexpected Business Interruption event affecting supply chain around Lunar New Year.
Some of the business problems above might be familiar to you, but every business is unique. If you are facing a different challenge and want to talk it through to see how we’d approach it, send us a message here: