How better controls and cash management led to a successful sale — and higher profits
We can talk about our fractional CFO services… or you can read about the results. See what we did for an area manufacturing company!
Challenge
A medical manufacturing company had a myriad of issues when going out for sale. Their books didn’t balance and weren’t being properly closed on a monthly basis. Management struggled to understand their margins and how operations were affecting profitability. The company did not have a cash flow management strategy and, as a result, had significant past due vendors.
After going through multiple rounds of due diligence, they came up empty handed because potential buyers were concerned with the reliability of the company’s financial statements. So they hired James Moore & Co. to get things under control.
Solution
Our first priority was to stabilize and strengthen the company’s finance team. We took the finance team under our wing and established controls and structure around monthly financial reporting to get accurate and timely results We also introduced new cash management tools to improve cash flows. Furthermore, we implemented data automation tools and dashboards to provide real time data.
Working with the company’s management team, we looked at profitability by product. We collaborated with operations to investigate areas of low gross profit products and built action items to improve those margins. We trained management on understanding key financial parameters and explained the impact they as team leaders have on profitability and increasing business value.
Result
When you’re selling a company moving from unsellable to sellable is the best result you can have. This client went from not being able to secure a buyer to an eight-figure deal that pleased all parties involved.
We still work with the company after the sale, and they continue to make great improvements. For example, margins are up nearly four points over the last two years. Cash flows have improved to the point where the company has no past due vendors, limited use of a line of credit and a strong cash position. Inventory levels are also stable with much more predictability.
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