A software company with $25M in revenue and operations in Europe, the US, and Australia
While the Company had a state-of the-art software package selling to Fortune 100 companies, the Company was losing money and strapped for cash. Additionally, they had an antiquated system in place and problems in their accounting department. The Company had a number of key projects ongoing, but some were losing money. Losses were particularly acute at their European operations. Their system was old and had not been kept up to the current versions. Since this could not be maintained, they implemented a number of manual fixes. In addition to problems with the accounting department, they had a serious sales tax delinquency in 25 states and did not have the previous year’s audit completed.
We immediately focused on managing cash by emphasizing AR collections and resolving issues that were impeding collections. We also had to aggressively manage the vendors. Within two months, we were able to obtain a $1 million bridge loan from the bank and finally completed a $5 million debt financing with the existing professional shareholders. We also focused on cost-cutting measures, including restructuring of European operations projected to save an additional $750K to $1 million. We downsized the accounting department and began the implementation of an accounting system with the emphasis on project profitability and the ability to streamline the intercompany consolidation process. Finally, we brought in a new accounting firm and completed the audit work and also worked with 25 states to resolve the sales tax delinquency, resulting in minimal penalties to the Company.
The Company was able to recover from its cash constraints and dramatically reduce its costs, particularly in Europe. The sales tax issue was resolved successfully and the new system was implemented resulting in a better understanding of the profitability of each project. A full-time CFO was hired in six months and Interlochen remained for another three months to ensure a successful transition while completing a number of key projects. The following year, the Company was sold to a strategic buyer allowing the investors to liquidate their investment.