Focus on Cash and Financial Management is Key to Growth

Situation

We were introduced to the management team of a vehicle rental provider by the existing bank.

The company had shown strong growth, but there was evidence of potential over-trading, cash pressure and there was extremely poor financial information.

The weak Finance Director had lost the confidence of both the board of directors and the bank.  The CEO had no confidence in the figures and other funders had the same view.

As a result, the bank and other funders were not prepared to increase facilities even though there was the prospect of significant growth across the existing and potential customer base.

Task

We carried out an Initial Review and highlighted many weaknesses, concerns and things that needed to change, some of them requiring urgent attention.

The Initial Review uncovered cashflow, gross margin and profitability issues including loss making and low margin contracts although there was still a good underlying business there.

We were asked to implement our recommendations and take on the role of Group Finance Director on a part-time basis.

Action

We made immediate changes in the finance and operational teams and recruited new staff including a Financial Controller.

We changed the slack financial management infrastructure to adopt a corporate and professional approach.

A new financial management and operational control regime was introduced.  This followed consultation with the operational team, management and the existing and potential funders.

The new reporting and forecasting regimes were introduced in conjunction with a new IT infrastructure and job management system.

We ensured focus on gross margins, on time and on-budget delivery and cash, whilst establishing a real-time job monitoring and review system.

We improved the quality and timeliness of financial information and the internal and external reporting pack.

A revised budget was prepared for the new financial year which was due to commence.

Within a matter of weeks, we had restored confidence in the figures and the CEO started to feel that the figures represented the operational reality.

We had a specific focus on cash and cash management and prepared a detailed rolling cash flow model and instigated weekly finance and cash team meetings.

The operational team were able to use the information to “run the business” and we improved operating margins as a result of this.

The new reporting pack and high-quality information allowed us to bring new funders on board and convince all existing funders to increase facilities.

The full financial year saw a strong performance ahead of budget.

Craig Alexander Rattray refused a full-time role at the end of the financial year.

Result

Key outcomes of the role included:

  • Turnover increase from £27 million to £38 million
  • EBITDA from less than £10 million to more than £15 million
  • Profit Before Tax up from less than £1m to more than £2 million
  • Asset Finance facilities increased from less than £20 million to more than £70 million
  • Overdraft of £1 million replaced by a Confidential Invoice Finance facility of £7 million
  • Debtor days reduced from 66 to 48 in the main trading company, and from 48 to 25 in the subsidiary
  • Introduction of direct debit facility going from zero collections to in excess of £1 million on a monthly basis representing c50% of the long-term hire revenue.