Situation:
Company’s financial performance deteriorated to the point of generating material financial losses. Turnover of executive management created a void and lack of internal leadership. The board was ill-informed on financial matters, and, a lender was ready to foreclose on eight-figure level of debt.
Challenges:
- Leadership void in multiple key levels within the company.
- Staff morale low.
- Lack of financial management and inadequate resources.
- Cash flow problems.
- New initiatives floundering and causing financial drain.
- Lost credibility with primary Lender.
- Multiple violations of financial covenants resulting in technical default.
Actions:
- Evaluated and diagnosed financial problems of the business down to the individual business units.
- Re-established communications with the Lender to regain lost trust.
- Worked with Board members to get them more engaged on financial matters with improved management reporting going to the Board.
- Acknowledged identified problems to Lender and set a corrective course of action.
- Negotiated forbearance agreements to allow time for company to execute turnaround plan.
- Maintained routine communications and reporting to Lender to keep them informed about action plans to improve cash flow and profitability.
Results:
- Improved billing and collections resulting in lower A/R outstanding, thereby improving monthly cash flow.
- Company able to pay down its working capital line of credit.
- Met new financial covenant tests.
- Lender and company working cooperatively to complete the financial turnaround.
