PRIMARY: Resolve short term and long term cash flow problems
SECONDARY: Performance turnaround

INDUSTRY: Commercial Printing

COMPANY: $2 million a year in sales

SITUATION: The company, which was recently purchased from the past owner by three employees, was unprepared to manage the aggregate result of losses from prior years.

• Over $90k overdrawn at their bank, they were unable to factor enough invoices to bring their account current.
• Their bank line of credit was over limit
• Payments on the term bank note were past due
• 4 months late with equipment vendors
• Accounts payable were growing unchecked
• NSF check fees, including bounced payroll checks were skyrocketing
• Older print equipment which needed regular maintenance was out of commission
• Sales were beginning to erode and a permanent loss of market share seemed imminent

The factoring firm suggested the company engage SDC, a turnaround professional.

SCOPE OF WORK: Steele Development was brought in to develop a cash flow solution, to resolve the overdraft position with the bank, develop a finance plan, assist in reducing fixed overhead, help control production costs and improve profitability.

TASKS PERFORMED:

• Within three weeks SDC developed a cash flow plan and 12-month budget based on known business operations.
• During discussions with SDC the bank ultimately agreed to roll its line of credit and term note into a single facility and to extend an additional $125k line of credit rather than give up its collateral against accounts receivable to a factor.
• SDC quickly moved to negotiate catch-up payment plans with the company's vendors and taxing authorities, giving priority to essential suppliers, in order to reduce and manage cash outflow over the next 18 months.
• SDC met with the owner/management tem each week for the first three months to set sales goals, improve collections, establish operational benchmarks and implement a weekly cash management reporting system.
• SDC assisted in the recruitment and hiring of a controller to improve the company's internal accounting and management reporting capabilities.
• Developed a weekly operational status report for distribution to the management team, bank and SDC.

RESULTS: SDC's involvement resulted in the company turning around its cash position in two months and exceeding first month sales projections by 15%. Annualized expenses were reduced over by $200k a year by implementing proposed changes in financing, overhead expenses and production costs. The company returned to profitability within three months. Organizational development and cost savings controls are an important part of this ongoing engagement.