Rescuing SME From Intensive Care

Topic: Cash Flow Improvements

Issue

Company B had made losses for two years. They were up against their overdraft limit and had also fully utilised their factoring limit – it was under scrutiny by their bank whose services were put on a six month notice.

Their bank undertook a review of its £100k factoring limit, its £100k overdraft and its trading record.

The factoring manager put the company on warning that it would continue banking services for only six months when another review would be undertaken.

Company B had a £1.0m turnover and the bank suggested a part-time finance director be engaged.

After engaging one of our FinanceHead members, they had a successful meeting with their bank manager, who not only continued their funding but extended facilities by 30%.

The company is still trading and is now operating profitably.

Resolution

After a thorough review of the company’s goals, the FinanceHeads member:

• made changes to their accounting processes;
• gave an analysis of the company income streams and of its cost structure
• advised on operational decisions to turnaround losses into profits
• introduced a cash planning and forecasting model with daily reviews
• reviewed fully the ledgers of debtors and creditors to help find Company B’s longer-term partners.

After some hard decisions, the company’s profits improved.

Impact

When the next bank review approached, the Managing Director was briefed and prepared reports to answer all of the bank’s potential queries.

When the bank manager arrived, she spent over two hours reviewing and questioning the business and operational reports, the business cashflow and the forecasts. She was impressed not just with the quality of the ready information for an SME, but also by the change of priorities of the business and of its newfound confidence and attitudes in decision making. Before leaving, the bank manager reinstated its factoring facilities without a notice period, plus offered a proposal to extend the factoring facility by either 30% or 50%.