Background:
We connected with Manufacturing Ltd., a $150 million industrial equipment company, struggling with shrinking profits and cash flow issues. While the business appeared solid on the surface, financial inefficiencies and mismanagement were holding it back. To address these challenges, they turned to us for expert CFO advisory services.
The Problem:
During our “Right to Fit” call, the client expressed concerns about rising losses. A thorough financial assessment revealed the following root causes:
1. Cash Flow Squeeze:
- Customer payments were delayed, causing a cash crunch.
- Short-term loans were racking up high interest costs.
2. Soaring Costs:
- Overhead costs increased by 15% over three years, without a corresponding revenue increase.
- Poor inventory control led to high storage costs and frequent stockouts.
3. Lack of Financial Strategy:
- The company had no long-term plan for financial growth.
- Unclear key performance indicators (KPIs) made decision-making difficult.
Our Approach:
1. Cash Flow Overhaul:
- Tightened credit policies to speed up payments, reducing receivable delays from 90 days to 45 days.
- Negotiated better terms with suppliers and introduced automated cash flow tracking.
2. Cost Cutting and Efficiency:
- Conducted a cost audit, leading to $2.5 million in reduced overhead expenses.
- Optimized inventory management to prevent stockouts and cut holding costs.
3. Long-Term Strategy:
- Developed a five-year financial growth plan.
- Introduced real-time dashboards to track KPIs, providing leadership with clear and actionable insights.
The Outcome:
- Profit Growth: EBITDA margin improved from 10% to 15% within 18 months.
- Cash Flow Boost: Receivables turnover halved, saving $1.2 million annually.
- Cost Savings: Overhead costs reduced by $4 million annually.
Summary:
In just 18 months, TRAY Management’s CFO Advisory Services helped Manufacturing Ltd. transform financial struggles into strengths, laying a foundation for long-term growth and stability. This case exemplifies how focused financial guidance can significantly improve a company’s financial health.
Ready to do the same with your business? Let’s talk!
