A manufacturing company with approximately $25 million in revenues.
The company was experiencing cash constraints.
Approach & result
After analyzing the financial statements, I identified 3 key opportunities to add $9 million in cash to company operations through the following areas:
Accounts Receivables were equal to the Line of Credit with the bank. After digging deeper, I calculated that it was taking about 156 days to collect the A/R. I also noticed that one major distributor owed the company about $3 million. I contacted the distributor, requested payment, and received a wire for $1.8 million within 48 hours, which we used to pay down the Line of Credit.
I calculated inventory was only turning over 2x per year, tying up a lot of cash. Working with the VP of Operations, we reduced the amount of inventory on hand, while ensuring the company had what they needed for manufacturing the products. After a few months, we increased inventory turnover from 2 to 6 times per year, resulting in savings of $2 million in cash.
I analyzed Accounts Receivable, Inventory, and Fixed Assets and determined there was enough collateral to increase funding from the bank. After providing the necessary documentation to the bank, I secured an additional $5.25 million in funding.