Finance Director: Andrew Northmore
Issue: Twelve months ago, this company was approached by a large international company who wanted to buy them out. The due diligence process proved to be a very painful experience for the Managing Director:
- Our client had good transactional bookkeeping and their Accountants produced the Statutory Accounts and Tax Computations. However, they did not have a Finance Director
- Financial information was either not available or could not be explained
- Information was requested in US GAAP as well as UK GAAP
- Management information regarding customer and product profitability, profit ratios, balance sheet ratios, business segmentation and key performance indicators could not be provided to the prospective buyer
- Key business processes were not robust and the prospective buyer found many issues
Not surprisingly, the due diligence process failed and the sale did not take place.
Corrective Actions: At this stage, the Managing Director decided to take on a part-time SouthWestfd Finance Director and within a short space of time the following objectives were achieved:
- Production of strategic plans, budgets and cash flow forecasts
- Recommended improvements to current systems, processes, financial controls and management information to ensure that the system infrastructure would support the company growth plans. Review of revenue recognition accounting and assistance with the integration of customer facing systems, procurement systems and financial systems.
- Provision of accurate and timely management information to enable corrective actions to be taken
- Delivery of year-end financial information to the tax accountants in a format that minimised their time and therefore minimised their fees
- Recommendations made on a selection of appropriate Chartered Accountants to advise on tax strategy, remuneration planning and prepare tax returns and statutory accounts
- Advice given on corporate governance
- Provision of the financial input on commercial decisions
- Attendance at board meetings and site management meetings
- Helped to identify continuous improvement opportunities
- Above all, ensuring the company could survive a future due diligence process
The company was recently approached by the same prospective buyer, still intent on acquiring the company. This time the due diligence process did not fail and the sale went through – in just over one month!