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Case Study 6 - Financial Advisory

Company Profile

Privately-held industrial products manufacturer approximately $85M in sales

Problem

The Company was advised by their lender to install a perpetual inventory system and was unsure how to proceed. They were also required to prepare a Business Plan with Financial Models supporting their decision to enter a new business expected to double annual revenues.

Action

We worked with the Client's purchasing and inventory control personnel to determine the need for a new perpetual inventory system. We also worked with Client's CEO, sales and production departments and utilized external research data to determine realistic assumptions and prepare a five year P&L, Balance sheet, and Cash Flow forecasts.

Results

Within a few days, we determined the Client actually had adequate inventory procedures in place, but was not reporting them correctly. Thus, unless the Client planned to upgrade basic manufacturing and financial systems, there was no need to spend an estimated $300K on new inventory and financial system upgrades. The financial models that we prepared and presented to the Client's commercial bankers resulted in a more than doubling of their credit facilities, from $10M to $25M.

 

Additionally, we determined that the Client had serious A/R aging issues with DSOs approaching 90 days. Senior management had been told they were closer to 45 days. It was determined that a more qualified CFO was needed if the company was to reach its objectives. Interlochen was responsible for sourcing, screening, and recruiting candidates, as well as assisting with negotiations.

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