An internet based service business with multiple locations around the US called upon CRS Financial Management Solutions to assist them in facilitating the transition of their accounting and finance responsibilities from one partner to a new partner. CRS was hired to perform the duties of a classic Interim CFO.
No financial reports had been generated for the entire first six months of the year. Vendors were complaining about late payments, employees had not been reimbursed for expenses, client invoices were being sent sporadically, and cash was tight.
Upon initial review of their financial records it was revealed that the company had experienced a loss for the first six months of the year in an amount that exceeded 5.5% of revenues. The revenue pipeline was insufficient to meet breakeven, given their cost structure at the time, within a 90 day period. And, because they had consistently not met the agreed upon covenants over the previous 12 months, their bank had transferred them to its special assets group for close monitoring.
We went to work………………
By the end of the first year our client posted a profit of just under 1% of revenues for the entire year. By the end of August of the succeeding year they were posting a profit of 13% on a year to date basis. The entire credit line had been paid off, a new bank and credit facility 33% higher than the facility at the prior bank had been secured, accounts receivable days outstanding had been reduced from 76 days to 59 days, a disciplined billing and monthly financial reporting process had been established and implemented, and management had been educated on the ongoing Key Performance Indicators they should be watching on a monthly (and sometimes weekly) basis.
Additionally, the transfer from one partner to the new partner had been completed and a new Director of Finance had been hired to begin the process of establishing internal controls and manage the accounting and finance operation on a permanent basis.
How much do real solutions cost?
Client Investment: ……… $265,000
Client Return: …………… $3,500,000
Return on Investment: … 1300%