Case Studies - Part-time CFO

Distributor Needs to Upgrade Financial Management as they add a Manufacturing Segment

A $5 million distributor and service organization for a line of shop equipment, wanted to expand the number of service parts they manufactured. This change would move the business from a distributor to manufacturer and increase the complexity of their cash flow and working capital needs.

Challenges:

  • The company lacked the timely financial information needed to make decisions as they changed from a distribution to a manufacturing model.
  • The lender was uneasy because the company lacked the forward looking financial tools to facilitate adequate evaluation of this change.
  • The credibility of the historic financial information was questioned because of numerous inconsistencies.
  • Lacking a forward looking financial plan, it was unclear how much cash was needed to fund the growth in inventory and receivables related to the change in the nature of the parts business.
  • The service side of the business had a seasonal rhythm geared to customer’s plant shutdowns. The company lacked the metrics to properly manage this complexity.

Solution:

  • A Part-time LauberCFO was engaged. The first project was to work with the office manager and review the prior year financial information to determine what adjustments were needed .
  • Used the corrected historic financial information and the anticipated changes to establish an assumption driven Financial Plan for the business. This Plan was used to evaluate the impact on cash-flow, accounts receivables, inventory and profitability of various courses of action and changing volume considerations.
  • Developed processes to improve the month-end closing process.
  • Worked to improve communication with the bank by providing timely, accurate financial information and a credible explanation of the changes that were occurring.

What this meant to the company:

  • Monthly financial results are completed within 10 to 15 days after month end.
  • Credible financial information was available to manage the changes in the parts business and the seasonal nature of the service business.
  • The same credible financial information was available to explain the changes that were occurring for the company in presentations to lenders, customers and vendors.
  • As a result, a new banking relationship was solidified which increased cash availability 250%.

The value of a Part-time LauberCFO:

  • Ability to look forward and provide a strategic financial perspective.
  • Extensive domain expertise in senior financial positions.
  • A trusted advisor to owner / CEO on many matters.
  • Looks at business through perspective of maximizing competitiveness and long term enterprise value.
  • Extended tenure with clients helps develop stronger financial and business acumen for client’s leadership team.