Eight Things You Must Do When Creating a Turnaround Plan

Friday September 9th, 2016 at 10:00am
Written by Jim Bitterle - Consulting Managing Partner

Is your company struggling financially?

If so, it may be time to create a turnaround plan. Turnaround plans assist companies in identifying the cause of underperformance; reverse it and return to profitability. There are a few essential elements to any financial turnaround business plan. Following are some basic actions and best practices to consider.

  1. Don’t waste time. If the company is performing poorly, don’t procrastinate. I’ve seen far too many financial disasters occur simply because managers and advisors are passive. If things are degrading, act now. Time can be your friend, or it can be your enemy. For turnarounds, unfortunately, it is too often the latter.

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When to Use an Asset-Based Lender

Tuesday January 26th, 2016 at 7:30am
Written by Jim Bitterle - Consulting Managing Partner

Virtually every mature company has gone through rough financial times. If you’re around long enough, your company will go through rough times again. When this happens, you may get moved to your bank’s “Special Assets Group.” Many banks have different names for this group, but in generic terms, they are all “workout” groups. The purpose of a workout group is to reduce the bank’s risk. Typically, this is accomplished by getting rid of accounts that have become too risky. In some cases, the workout group will work with the company to remediate it, then return the company to the original lender. Unfortunately, this scenario occurs infrequently. Most workout scenarios require the company to find an alternative lender, then pay off the current bank.

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Why Your Business Cannot Survive without a Good Cash Forecast

Wednesday October 14th, 2015 at 8:00am

Written by Nehal Desai - Associate Consultant with EDSI

ndesai@edsisolutions.com

 

Cash availability is critical for any business. Whether to pay vendors, creditors, or staff, having cash on hand is essential. Why then, is a good cash forecast so often overlooked and underutilized?  Does your business maintain an accurate cash forecast? Are you using your forecast correctly to make the most effective and profitable business decisions? Having an accurate cash forecast can help identify potential future shortcomings and allow a business to take corrective actions to ensure their operations run smoothly! Read on to understand the basics of a cash forecast and how it can aid your decision-making process in times of low or high growth.

We often see businesses show increased sales and positive profits, yet, they still run out of cash. Simply stated, cash flow is the lifeblood of a business.

A cash forecast can accurately express a firm’s cash position in future periods. Commonly, a 13-Week Cash Forecast and an Annual Operating Plan (AOP) are preferred forecasting methods. The 13-Week Cash Forecast outlines the cash position for the upcoming 13 weeks, while the Annual Operating Plan (AOP) shows the monthly cash needs and surpluses for each month in a fiscal year. Most firms create an AOP at the start of the year and update on a regular basis. The 13-Week Cash Forecast is often used when cash is becoming (or has already become) a concern. It is a great way to manage cash in the short-term and make strategic changes to manage the cash position.

So how can cash forecasts be utilized in business decisions?  Cash forecasts help companies manage their growth, working capital and lines of credit with lenders. 

Imagine business is booming. Customer orders are rolling in faster than you can handle. You are ecstatic as profits are going through the roof. Soon, you realize that although profits are soaring, more cash is leaving your bank account than coming in. Now cash is not available to pay key vendors, and orders need to be put on hold. Sadly, despite the increased sales orders, the company is stuck without inventory and unable to fulfill demand. A 13-Week Cash Forecast, coupled with the right strategies, could have prevented this.  Cash needs would have been estimated and preventive measures to avoid cash shortages executed.  

Now imagine an opposite scenario. The sales forecast is down. There is hope on the horizon, but you are unsure of what your cash needs are for the next month. The cash forecast can help determine when collections and payments occur using the predictive nature of both sides of the transactions. Utilizing the forecast, firms can be aggressive in their collections when they foresee an upcoming cash shortage, or use the forecast to negotiate an increased line of credit with creditors. A cash forecast helps your company get ahead of the situation and take appropriate action to lessen or eliminate negative impacts associated with cash constraints. 

A lack of positive cash flow and insufficient credit to finance the business is a common issue for underperforming businesses. A well-formulated cash forecast is the perfect solution to help manage a company’s cash and credit, and equip it with the right tools for long-term success


What steps are you taking to ensure that your company has the necessary cash available to ensure success? Please let us know how we can assist you in your efforts.

If you are interested in gaining more information regarding our financial consulting services, please contact me at ndesai@edsisolutions.com

Click here for more info about our consulting solutions on our website. 

 

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This program with EDSI is very, very strong. There are a lot of successful people here, and I am one of them. Osha Wright - Pittsburgh RTC Program Participant

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