Earlier this year a former client reached out to me as her business had suffered a series of setbacks of lost contracts, suppliers seeking bankruptcy protection and the deterioration of market prices.
The business was on shaky footing and the business was currently without a CFO or Controller, they lacked the analysis needed to run the business.
Upon being engaged, I met with the operations and accounting teams to get a sense of the issues.
We started by reviewing the financials, dug into the details, reviewed outstanding receivables, assessed collection trends and detailed out outstanding commitments.
The result of this effort was a cash flow projection that estimated the business was going to be out of cash with a fully depleted line of credit in less than two weeks.
When I visited with the client, she knew there was a problem, but she was not fully aware of the impending demise of the business she and her husband built.
Cash Flow Strategy
We quickly pulled together a two week cash flow strategy to conserve cash and find additional sources of cash inflows.
By personally communicating with a key client, she was able to expedite payments on receivables which provided an additional week of runway.
Although she hit a roadblock with seeking to expand the credit-line with the bank, in conversations with operations and per review of inventory details, we identified approximately $2.5 million in slow moving / obsolete inventory.
We worked quickly to identify possible interested parties to purchase the inventory and through a series of connections, the business was able to sell a portion of the inventory items for a little over $1 million.
Through these steps and others, we were able to guide the company to get through their cash crisis and continue operations.
Cash is still being projected on a weekly, monthly and three month time period in order to maintain control over the cash cycle.
The business is not home free at this point, but we have worked together to create better discipline within the company.
Cash Flow Gap
The inability to manage cash well leads to the inability to meet current obligation which then damages your business’s brand.
Earnings are vanity, and cash is truth as it relates to the financial management and health of a growing company.
The cash flow gap between paying vendors and payroll and collecting payment from customers is a challenge that is only solved through effective cash flow management.
At its simplest, cash flow management means taking deliberate steps to ensure the flow of cash in (AR collections) comes before the flow of cash out (inventory purchases, vendors, etc.).
As we have consulted with clients and business owners during 2020, the steps have been the same. We help clients assess and engage their specific circumstances and then advise clients to focus on the specific controllable areas that impact the bottom line.
One of the primary areas of focus for both us as an advisor and the client is gaining a clear view through the cash flow management process.
Our B&V CFO Advisory Services team works with business owners to ensure a rock solid accounting foundation, actionable cash flow management services, and strategic Controller and CFO advisory support to mitigate brand damage risk.
Our accounting, regulatory and financial expertise provides business owners comfort that their financial health is well handled while the owner focuses on driving the company forward.
Over the next few posts we will focus our attention on the components of a good cash flow analysis as well as recommended steps on surviving a cash shortage
Our Part of Your Solution
All businesses have a need for cash flow analysis and projections.
Our B&V CFO Advisory solution provides experienced Controllers and support team members with experience in cash flow analysis and establishing best practices.
Whether supporting your accounting team or serving as your outsourced accounting and finance function, we assess the issues, choose the best solution option available, transition into solving the issue and engage in the process.
Our experience has shown us that our CFO Advisory services generally represent 60 to 75% of the cost of a fuller sourced, on-site accounting controller’s salary, benefits, and bonus.
We engage our clients with a highly experienced team at a fraction of the cost of an in-sourced team.
Our dedicated CFO / Controller, Accounting Manager and support staff is always there to answer questions, provide a structured control environment to protect your assets, and focus on helping you understand and mitigate your financial and operational risk.
If you are a service-based business:
- In need of financial expertise and guidance,
- Desiring a cost effective alternative to a full time Controller / CFO
Our B&V CFO solution may be the best option. Our aim is to take care of your strategic finance and accounting needs so that you can take care of your business.
Interested in our CFO / Controller Advisory Services? Call us at 713.667.9147 and ask for Kevin Stewart or Jana Kelly to schedule a free 60-minute consultation.
About the Author
Kevin Stewart is an accounting executive within professional services, public and private growth companies.
He has 20 years of experience turning around and building accounting and finance teams to fix the sins of the past, stabilize the now and create organizations to support growth.
His deep finance, accounting and compliance expertise helps business owners focus on what they do best – run and grow the business.
As your Chief Profit Officer (CPO), he will help improve your profits by focusing and advising on the controllable financial aspects of your business.
Surviving a Cash Flow Crisis (Part 1)