Finance Director: Peter Macklin

Issue: Lack of cash

Root Cause: Fast business expansion

Corrective Actions: Implementation of a ten step plan as follows:

1.    Open and clear communication with board and management – work as a team and ensure everyone is united in the push for cash
2.    Distinguish between profit and cash
3.    Ensure approval processes are in place for all expenditure – requisitions, purchase orders, authorisation limits. If necessary, ensure CEO signs off all expenditure
4.    Implement Rolling Cash Flow Forecasts

a.    Daily cash flow forecast for next month
b.    Weekly cash flow forecast for next quarter
c.    Monthly cash flow forecast for next 12 months

5.    Cash flow reporting – graphical presentation helped a lot here

a.    Daily summary of income, expenditure and cash balances compared to forecast
b.    Weekly report on top 20 overdue debtors (or debtors making up 80% of overdues)
c.    Key performance indicators – Debtor days, creditor days and inventory turns

6.    Working capital optimisation

a.    Inventory – just in time philosophy
b.    Receivables – credit policy, new customer vetting, clear payment terms, prompt and accurate invoicing and robust collection routines
c.    Payables – maximise credit terms, review procurement strategies

7.    Create a cash generation plan that covers the cash shortfall. This included:

a.    Fixed Assets that can be refinanced
b.    Fixed assets/facilities that can be sold
c.    Fixed asset expenditure that can be delayed – make sure that overall equipment effectiveness (OEE) is maximised before additional equipment is purchased
d.    Sale of excess or slow moving inventory at discount prices
e.    Improve inventory turns
f.    Reduce debtor days
g.    Invoice Finance
h.    Early Settlement Discounts to customers
i.    Negotiate slower payment terms to suppliers – may come at a price but in this instance cash is king
j.    Contact HMRC and make use of their business support service to agree payment plans for PAYE/NIC and VAT
k.    Request temporary payment holiday on loans
l.    Consider payroll finance
m.    Overdraft facility
n.    Apply for grants – linked to job creation/capital expenditure

8.    Clear communication with stakeholders to avoid surprises – be realistic, be confident and stick to what you agree.
9.    Remain disciplined and don’t get complacent
10.  Stay LEAN and minimise waste