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A Case Study in Future-Proofing a Local Health Facility

The Situation:

A community mental and behavioral health facility has been providing a wide range of residential care, counseling, and other community health services for youth, adults, and families since the 1960s. These programs represent Core Services, funded by public contract sources – 60% of its total budget, and Transforming Services, funded by donor contributions -less than 10% of the annual operating funds. The facility experienced a declining patient population due to state regulatory and procedural changes, and caretaker staffing difficulties. Despite new leadership in 2020 to initiate a wide-reaching plan to grow the organization and steamline its operations, COVID-19 and additional state regulation changes, forced the facility to reconsider its services and address operational inefficiences, while trying to maintain excellent patient care. In 2022, they enlisted DWH to assess and identify gaps between business best practices and its current state, and to provide recommendations to bridge these gaps to facilitate the improvement of the Organization’s operating and financial performance.

The Solution:

DWH developed an understanding of the facility by gathering qualitative and quantitative data through interviews with key employees and stakeholders; examining and understanding key assets (on- and off-balance sheet) and processes; and reviewing certain financial and non-financial information. DWH was able to identify and assess the facility’s current state, areas for improvement and provided recommendations that were divided into three main areas of (1) Leadership, (2) Finance and Management Information, and (3)Operations.

The Outcome:

DWH was able to identify gaps and make best practices recommendations to close those gaps. We developed and prioritized “Next Steps” for the organization including quick-win items to create momentum within the organization and longer-term projects to become part of strategic planning. Finally, the facility received a 13-week cash flow forecast summary to help with cash management, decision-making, and communication with key stakeholders.

 

 

As a group of financial and business professionals, DWH offers expertise and support so companies can embrace change for the better. Built on a core philosophy that every stakeholder matters, we listen to those who shape a business and guide that business to its best value, outcomes, and opportunities. All companies experience change. Plan for it with us.

 

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A Case Study in Ensuring Financial Resilience

The Situation:

A Michigan-based manufacturing company specializing in assembling products in the industrial, automotive, office furniture, and commercial appliance industries is known for delivering precision-engineered manufacturing solutions for its customers. The company hired DWH as a requirement of its bank for them to engage a third party to evaluate current financial projections, perform a stress test on these forecasts, and assist with developing or enhancing tools and processes to support future growth.

The Solution:

DWH evaluated the company’s working capital model, annual budgets and forecasts, and a 13-week Cash Flow forecast by gathering underlying qualitative and quantitative data collected through interviews with key employees and stakeholders, examining and understanding critical assets and processes, and obtaining and reviewing certain financial and non-financial information. This data formed the basis for understanding the financial state of the business and allowed DWH to assess the company’s financial resilience by conducting a series of hypothetical scenarios simulating various economic and market conditions, using the financial information and models provided.

The Outcome:

After researching and collecting extensive financial data from the company and performing the stress test scenarios, DWH delivered detailed recommendations for the company. These recommendations include best business practice guidelines and future risk mitigation strategies based on an analysis of its current financial situation and projected growth in the future. The company now has a full understanding of its financial resilience.

 

 

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Managing Cash Flow Amidst Disruptions

Disruptions can happen to a business at any given time, which can turn business operations upside down. One type of business disruption is when one of your suppliers or customers files for bankruptcy.

DWH Partner, Jeremy Cosby discussed this type of business disruption in a recent interview and shared his thoughts on how businesses can navigate through this type of situation to help ensure they come out on top.

1. Proper Cash Flow Management

Cash flow is always important, even more so in times of change and transition. It is important to understand the potential scenarios that could affect the cash that you need to run your business.

Managing cash flow, whether it’s a bankruptcy, strike, pandemic, etc., and understanding the levers you can pull to control your cash flow, will help you navigate through that transition. Having good cash flow management means you have tight control over what’s going on, both in the past and the future. Doing thorough scenario planning in advance will allow you to navigate challenges when they arise.

2. Understand Different Scenarios That Could Affect Cash

A business owner needs to understand the different scenarios that could affect the cash that is needed to run the business. For example, in a supplier or customer bankruptcy, the client needs to understand how their supply chain or customer will be directly or indirectly impacted by the bankruptcy. What are the types of vehicles involved? What impact does the bankruptcy have upstream or downstream? How will I be impacted and when? How will my suppliers be impacted? Answering these questions will inform all the rest of your decisions. Typically, businesses impacted the most are the smaller suppliers (downstream) who don’t have the reserves to absorb the impact.

3. Understand the Impact of the Bankruptcy

A key element in proactively protecting your cash flow is to grasp the impact the bankruptcy will have on your business. One effective way to gain that understanding is due diligence. Due diligence must be done thoroughly and promptly. For example, if you are concerned one or more of your suppliers is financially distressed, then spend the time to develop alternative supply sources. If you are concerned a customer is financially distressed, then closely manage your outstanding accounts receivable.  Doing this proactively can put you in a better position with suppliers, with customers, and leverage tools and resources.

The quicker you understand the impact, the sooner you can take action.

4. Have a Well-Prepared Strategy

Remember that managing cash flow during a significant disruption is a temporary challenge. It requires flexibility, creativity, and strong financial planning. Having a well-prepared strategy can help your business weather the storm and emerge stronger on the other side.

DWH has helped hundreds of businesses improve liquidity by helping them understand the way cash flows through the organization from invoice to invoice. We can help you too. Book a consultation to get started.

 


Originally posted on June 1, 2021, by Jeremy Cosby
jcosby@dwhcorp.com | LinkedIn

All companies experience change.
Plan for it with us.

 

 

If you found this topic interesting, our strategic partner, JACO Advisory Group published content you may find relevant as well: “How a 13-Week Cash Flow Forecast Model Can Benefit Your Business” and “13-Week Cash Flow Forecast – A Day-to-Day Cash Management & Longer Term Operational Planning Tool