Financial Controller Role – Case study 1
Client X imported products from overseas in dollars and sold them to the public and trade in the UK. Cashflow was tight as goods were paid for in advance in dollars, received up to 8 weeks later, could take up to 30 days to sell and an average of 60 days credit was given to their customers.
We were referred in by their bank to assist with cashflow management as the company regularly went over their agreed overdraft and the director was constantly stressed over the lack of cash.
Our recommendations proved successful:
- Forward buy dollars to reduce the f/x uncertainty
- Agreed better payment terms with suppliers via an upfront deposit only along with credit facility
- One supplier agreed to invoice in sterling transferring the exchange rate risk to the supplier
- Offered incentives for customers to pay early
- Introduced a sophisticated stock system which analysed buying trends and produced order requirements – thus reducing over buying
- Agreed a fixed monthly amount to be drawn by the director instead of drawing money ‘as and when’
- Created a credit control procedure which started 2 weeks before the debt became due
- Sold off any old stocks at a discount without credit terms to boost cashflow
- Reviewed competitor pricing which encouraged the director to increase sales prices to account for the stronger dollar
- Created a six week rolling cashflow and six month monthly cashflow to highlight any potential issues
- Set up a savings account with standing order to save for the annual corporation tax payment
- Reviewed the sales reps commission structure and restated it based on gross profit as opposed to turnover
The above although difficult and time consuming to implement had a huge impact on the cashflow, the bank are much more comfortable and the director far less stressed.