Solving Complex Working Capital Challenge

Consumer Goods Distributor

Situation

Rapid growth, combined with a recent acquisition, created cash flow constraints for a consumer goods distributor. The situation was made more acute by the company’s expansion of facilities and equipment, difficulties in collecting accounts receivable, challenging customer and creditor payment terms, and other seasonal business issues. Referred to DWH by the company’s bank, the company was seeking advice and assistance with the development and implementation of cash flow and financial forecasting models that would allow it to evaluate immediate and near-term sources and uses of cash, anticipate financing required to support forecasted sales and operating activities, and improve related business decisions.

Solution

DWH designed, developed, and assisted in the implementation of two unique forecasting (budgeting) models for the client. The models were established to improve management decision making and, thereby, improve business performance. Given immediate and near-term cash constraints, DWH first created a rolling 13-week cash flow forecast, and then created a rolling 12 to 24-month operations and cash flow forecast (budget). The rolling 13-week cash flow forecast was for use in evaluating immediate and near-term cash management decisions. The rolling 12 to 24-month forecast was for evaluating immediate and near-term business decisions.

DWH completed the forecasting models and assisted in their implementation, maintenance and ongoing use in improving decision making. Relationships improved with the company’s bank, customers, and creditors, primarily because the company was able to make and meet its financial commitments with increased confidence and reliability. The company continued to grow and create additional value through improved management of its working capital, including negotiating new arrangements with customers and creditors.

Tags: