Case Studies
The client was a well-established, family-owned specialist printer with annual revenues of $50M. The CFO and controller had recently left the company. The client and its lender reached out for assistance in completing the annual audit and working through its annual field exam, which the lender was pressing for due to ongoing poor financial performance.
Following our first-day interviews with the owners, management, and staff, it was clear that the client’s issues reached well beyond delays in producing financial information. Without immediate action, these would continue to manifest. The findings were reviewed with the owners and their lenders, who requested an expanded engagement to analyze the issues and develop a plan to address the problems identified.
A review of margins generated across different product lines showed that the client was losing high-margin custom orders due to production issues and had to replace this revenue with low-margin and often loss-making sales to well-known retailers. This resulted in a depletion of profitability and cash flow due to excessive credit terms and increasing concentration risk.
Working with the client’s production and sales teams, a plan was developed to address quality and on-time issues and to focus sales activity on high-margin products while decreasing the reliance on large retailers. We demonstrated the need to employ quality personnel at all levels and assisted in recruiting finance and operations staff. Performance was tracked using short-term forecasts and rolling 13-week cash flows, and within 120 days, the business began to generate positive monthly cash flow and return to a growing positive EBITDA. By 180 days, all loss-making product lines had been removed from the client’s catalog, and low-margin sales to online and big-box retailers were eliminated.
We concluded the initial audit and field exam work within two months and the extended engagement within six months, at which time, with the agreement of the client and the lender, we handed over to a newly appointed CFO.
Hamish P. Davidson
Managing Director
+1 689 223 5380
[email protected]
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