case study - turnaround practice

Consumer product importer

Stakeholder: lender.

Business: the import and sale of consumer durable products to the UK's largest retail multiples. Turnover - £3.5m sales, 10 employees.

Objective: a funding crisis arose for this company because of a policy decision taken by the provider of invoice discounting facilities to exclude 40% of the company's turnover from funding cover and by the company's loss of control over its books and records. These two facts were forcing the lender to advance funds on overdraft in order to avoid a crisis. The objectives of the assignment were, therefore, to recover the books and records, to produce reliable management information and forecasts to support profitability statements and to negotiate replacement invoice discounting facilities.

Process: a team of three people were assigned to the company to update and reconcile the books of account, to manage cash and supplier expectations, to collect all overdue debts and to produce management information. Once confidence in the record keeping had risen to an acceptable level, management were engaged in producing financial forecasts to demonstrate the ongoing profitability of the business. These forecasts were then used to recover the confidence of the lender and to negotiate replacement funding facilities.

Outcome: overdue receivables have been reduced by 75% and the company's financial administration has been outsourced. Regular management information is now produced for all stakeholders. New funding facilities have been negotiated and the processes of rationalising the board membership and of analysing the inherent business risks have started.