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.

 

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.

 

 

Promoting Cultural Diversity During Native American Heritage Month

Powwow celebration with traditional Native American dance

November is Native American Heritage Month, which was created in 1990 through a presidential proclamation and has continued to be observed ever since. The month is dedicated to showcasing the immense importance of this group, as it represents the rich history, culture, and contributions of Indigenous peoples in the United States.

During the month of November, awareness is spread about Indigenous history, contemporary Native issues, and the accomplishments of Native Americans who have enriched our culture.

Why celebrate Native American Heritage?

As a tribally owned company, our team is passionate about protecting tribal sovereignty and growing economic prosperity throughout Indian Country. We want to share a few important reasons to recognize and celebrate Native American heritage:

1. Acknowledge the historical & ongoing contributions Native Americans have made to the nation.

From agriculture and medicine to language and art, Native Americans have made significant contributions to American society. Acknowledging and celebrating their heritage allows us to honor their achievements and recognize their importance in shaping our collective identity.

2. Foster cultural awareness and appreciation.

It allows individuals to gain a deeper understanding of Indigenous traditions, values, and perspectives, and this knowledge can lead to greater respect and appreciation for the diverse cultural heritage that exists within the United States.

3. Address historical injustices and promote social justice.

Throughout history, Native Americans have faced colonization, forced assimilation, and marginalization. Recognizing their heritage is a step toward healing historical wounds, promoting cultural preservation, and empowering Native American communities.

How to Celebrate Native American Heritage

Although it’s nice to have a month dedicated to celebrating and honoring Native American heritage, there are many ways you can continue acknowledging Native Americans throughout the entire year. Here are a few ideas to help you get started:

Attend cultural events

Look for local events, powwows, or cultural festivals that celebrate Native American heritage. By attending these events, you will be able to experience traditional dances, music, food, and crafts.

Educate yourself

One of the best ways to celebrate Native American heritage is to educate yourself about their history, culture, and contributions. Read books, watch documentaries, or visit museums dedicated to Native American history.

Volunteer and support Native American organizations

Get involved with local Native American organizations. Offer your time and support by volunteering at community events, fundraisers, or educational programs that promote Native American heritage and empower Indigenous communities.

Support Native American businesses and artists

According to U.S. Census Bureau statistics, Native American-owned businesses contribute over $33 billion to the U.S. economy every year and employ over 200,000 people. We encourage you to seek out Native American-owned businesses and artists and support their work and help sustain their livelihoods.

Amplify Native American voices

Give platforms and opportunities for Native American voices to be heard. Share books, articles, art, and other resources created by Native Americans to promote their perspectives and insights.

 

We encourage you to approach Native American heritage with sensitivity and respect. We feel that engaging in cultural appreciation rather than cultural appropriation is crucial to ensure Native American traditions and identity are honored and preserved.

A Case Study in Cultivating an Entrepreneurial Culture

The Situation:

DWH partnered with the Nottawaseppi Huron Band of the Potawatomi (NHBP), a federally recognized tribe in western Michigan, to cultivate an entrepreneurial culture among its members. Recognizing the untapped potential within the community, NHBP leadership sought to empower its members with the tools, knowledge, and resources necessary to launch, acquire, or scale small businesses.

The Solution:

Instead of offering a one-size-fits-all solution, DWH deployed a nuanced, multi-phase approach tailored to the specific needs and aspirations of NHBP members:

  • Needs Assessment: We designed and circulated a comprehensive survey to gauge interest, evaluate current skill levels, and understand the entrepreneurial dreams of the community members.
  • Curriculum Design: Using the survey insights, we crafted a targeted curriculum complete with topics and training materials that addressed the unique needs of the tribe.
  • Educational Bootcamps: Quarterly full-day workshops were planned, offering structured learning experiences and opportunities for attendees to provide feedback.
  • Personalized Mentoring: For those who had successfully completed the educational sessions, in-depth mentoring opportunities were made available to provide hands-on experience and guidance.

The Outcome:

The COVID-19 pandemic brought unprecedented challenges, disrupting our planned in-person educational boot camps. Undeterred, we swiftly transitioned to a remote learning model. Despite this pivot, we successfully conducted extensive surveys that gave NHBP an actionable roadmap to harness entrepreneurial talents and interests within their community. All remote training sessions were recorded and archived, serving as a lasting educational resource for the tribe.

 

 

The 2023 Outlook + Strengthening Your Business

Recession is on everyone’s mind these days. The current economic climate, characterized by the ongoing COVID-19 pandemic, inflationary pressures, supply chain disruptions, and general economic uncertainty, has raised concerns among business owners and individuals. As an advisor to numerous business owners, I am often approached to provide insight into the situation. However, given the scarcity of available data and the dynamic nature of the situation, making accurate predictions can be challenging. Rather than share our predictions, we would like to provide practical advice to help business owners prepare their companies for economic uncertainty and navigate any potential financial distress. Here are seven steps to build resiliency and weather any storm that may come your way:

1. Communicate with Your Stakeholders

In times of uncertainty, the quality of your relationships with key stakeholders can make all the difference. Do you know who your key stakeholders are?  What do you need from them?  What do they need from you?  Some examples are listed below with questions to ask:

  • Customers and Vendors – Do you understand their pain points? Are you aware of how they build their schedules?  What their capacity is?  Do you have relationships with multiple decision-makers?  Do you understand their financial strength?  Do you regularly meet with them to touch base?
  • Employees – Do your employees understand the vision of your company and its goals? Are they aware of how their actions have an impact on those goals?  Do you have a rhythm of communication with employees?  Do you use key metrics to communicate performance?  Do you conduct regular employee surveys?
  • Bank – Do you meet regularly with your banker and their team? Are you proactive in telling them about any potential changes to the business?  Do you regularly update them on any changes to your financial forecast?  Remember, your bank is a partner, and you want to keep them informed.  You cannot over-communicate with them.  To read more about managing your relationship with your bank, see our post, How to Engage a Key Stakeholder: Your Bank.

2. Build a Strong Leadership Team

Having the right team in place is critical, especially during a challenging situation like a recession. Ensure that your leadership team understands their roles and responsibilities, is held accountable, and has bought into the company’s vision and goals. In one of our previous blogs, Effective Leadership In a Crisis, we discuss how your response in turbulent times will define you as a leader.

3. Utilize a Robust 13-Week Cash Flow Forecasting Model

Understanding your cash flow is crucial in times of economic uncertainty. In one of our previous blog posts, How to Preserve and Improve Liquidity, we discuss how a strong cash flow forecasting model (CFFM) will help you accomplish these primary objectives:

  • Predict cash flow and collateral week over week for at least the next 90 days.
  • Improve decision-making at the transaction level.
  • Improve communication with key internal and external stakeholders.

4. Incorporate Scenario Planning and a Rolling 24-Month Forecast

A rolling 24-month forecast model that includes a profit and loss statement, balance sheet, and statement of cash flows can help you run scenarios and see the impact of various factors on your business. By incorporating covenant calculations, you can forecast any potential compliance issues with your bank. The models should be constructed so you can run scenarios (lower sales, higher costs, extended terms, etc.) and see the impact. For more information, see our previous blog post, Business Resiliency Through Scenario Planning.

5. Understand Your Cost and Pricing Structures and Review Regularly

Many businesses do not have a process in place for regularly reviewing costing and pricing data, identifying opportunities for improvement, making those improvements, measuring the impact, and repeating. With all the disruption in the supply chain, increase in labor costs, and inflationary pressures it is critical that you truly understand the cost to produce goods or provide services and that you are regularly working to reduce these costs. Additionally, you must ensure that you are capturing cost increases and passing them on to customers when appropriate. Be sure to look at our blog about Understanding Your Cash Conversion Cycle for more info.

6. Look for Opportunities

Change creates opportunities. This may be in the form of the opportunity to acquire a competitor or supplier. It could be discounted equipment or employees that become available when another business is struggling. It could be increased volumes when another supplier can’t meet their obligations to a customer.  Whatever the opportunity, you want to make sure that you are correctly positioned with the staff and resources to pursue these opportunities.  For more information on distressed investing, view our webinar on Key Considerations for Purchasing Distressed Assets.

7. Don’t Wait to Ask for Help

Finally, make sure you’re not waiting to ask for help with any of the items above or other challenges you may have in your business. Lean on your advisors and business network for help preparing for the challenges that might lie ahead. It’s essential to remember that these steps are not just for preparing for a recession; they are sound business practices that can help your company to thrive in any economic climate. By focusing on strengthening your business fundamentals and taking a proactive approach to managing risk, you can set your business up for long-term success.

 

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.

 


This post was written by Ben Borisch
bborisch@dwhcorp.com | LinkedIn

All companies experience change.
Plan for it with us.

 

 

 

A Case Study In Succession Planning

Overview:

The company was founded in the 1940s becoming one of the premiere mold-making facilities in the United States.  Eventually, they offered complete injection molding and product assembly along with other manufacturing support processes to their customer base which included the furniture industry. The company consists of two manufacturing locations within the United States and has approximately $15M in revenue.

The Situation:

  • Ownership had established a comprehensive estate plan but had not developed a succession plan.
  • The owner passed away leaving his beneficiaries without a clear path forward regarding the business interests.
  • Estate trustees were looking for a third-party recommendation on how best to maximize the enterprise value of the estate.

The Solution:

  • DWH performed a thorough assessment of the company’s leadership, financial and management information, operations, and marketing and sales to draw conclusions regarding the company’s current situation and future prospects.
  • DWH provided numerous recommendations which included a risk/benefit analysis.
  • DWH determined the best path forward was an expedited sale or a winddown and liquidation of the company.
  • DWH was hired to implement its recommendations which included facilitating an expedited sale of the company to a strategic buyer within 90 days of engagement to maximize value.

The Outcome:

  • The transaction was successfully completed within the desired timeframe.
  • All creditors were paid and the proceeds to the estate were double what would have been achieved through a liquidation.

 

Leading with Diversity, Equity and Inclusion

Successful leaders are undertaking initiatives to address Diversity, Equity, and Inclusion (DEI) within their organization to assess company culture, structures, practices, and policies – in particular, ones that create bias and an uneven playing field capable of causing damage to organizational health and performance.  The need for diverse talent in the workplace is evident with a clear correlation between DEI practices and organizational effectiveness.  Now, more than ever, it is necessary for executives to develop a shared vision, create learning environments, and embrace these initiatives – both for the sake of ethics and because this is what it will take to compete in the future.  Let’s discover more about DEI and why it is important to an organization’s health.

What is Diversity, Equity & Inclusion?   

  1. Diversity is about the presence of difference within a group. This is where differences of race, ethnicity, sexual orientation, gender/gender identity, and religion should be considered for their presence at all levels within the organization.
  2. Equity is all about ensuring equal access to the same opportunities. This is the proverbial “equal playing field” and where barriers to opportunities or resources need to be eliminated. In order to achieve a fairer workplace, it is essential to observe unconscious bias in policies, practices, structures, and resources.
  3. Inclusion is about cultivating a culture that invites and encourages the feeling of being welcomed, valued, and incorporated into the workplace. Inclusion can be more difficult to address because the overall culture of the organization largely determines it. This means that discovering the root causes behind a lack of inclusion can be harder to pinpoint. 

3 Reasons Why Companies Should Embrace DEI 

Among the many reasons to address the issues of Diversity, Equity, and Inclusion (outside of the ethical perspective that it is the right thing to do) there are three that stand out:  

  1. “War for Talent in the Workplace”There is now, and will continue to be for the foreseeable future, a war for talent in the workplaceThis has only been reinforced during the post-Covid “Great Resignation”.  DEI programs address bringing more diverse talented employees into the organization while also increasing retention as it makes it a more attractive place to contribute to and grow inA high performer is more likely to select an organization that has an aggressive DEI program and is more likely to stay because that program allows for them to make a significant difference and values their development.
  2. “Diverse Organizations Outperform Peer Organizations”There is ample evidence that more diverse organizations outperform similar, but less diverse organizations.  A recent McKinsey study found that diverse organizations outperform industry averages by 33%.  This Is because those organizations that can take advantage of diverse teams will have insights and opinions with that are more accurate and nuanced to the environment than ones from a more uniform perspective.  In addition, teams that can take advantage of diverse knowledge and experience are more innovative and creative as their diverse viewpoints help them come at problems and solutions from different perspectives.  Clearly, organizations that serve ever wider and more diverse consumers will be less likely to understand their customers’ needs and perspectives if those same demographics are not present in the organization serving them.
  3. Outside ExpectationsThere is mounting pressure for reporting diversity numbers and DEI programs with mandatory Environment, Social, Governance (ESG) reporting for the SEC.  In addition, activist investors are also demanding that organizations make significant progress in addressing inequity and lack of diversity in their investments.  There is also evidence that consumers are increasingly making buying decisions based on issues such as commitment to sustainability and equity. 

What should DEI efforts consist of?   

Diversity is perhaps the easiest concept to understand and measure as it can be accomplished by surveying the organization. Race and gender are typically easier to measure, whereas traits like identity can be more difficult, requiring a more nuanced approach with involvement from the broader organization (most importantly by those who are in those categories). Typically, initiatives include at least some of the following: 

  • Key Metrics – Identification of where they are on key metrics such as employee diversity, retention, representation in key leadership positions, and defining what they intend to achieve by instituting a program. 
  • Training – Global training on unconscious bias and its impacts on relationships, participation, and performance serves as a baseline for further efforts. 
  • Policies and Procedures – An assessment of policies and practices in the organization which might provide barriers for recruiting and retention, inclusion, and creating an unequal playing field should be conducted and addressed. 
  • Mentorship and Sponsorship – Another key element is the creation of mentorship programs that attend to the particular barriers that diverse employees face, including a special emphasis on diversity in high-potential programs. Sponsorship Is advocacy for Individuals to be Included In opportunities to gain experience and visibility. 
  • C-Suite Positions – A focus on ensuring a presence of diversity in the C-Suite and Board of a company is necessary from the start to show commitment and provide advocacy for the program.

Culture is Key 

A genuinely successful DEI program not only hinges on the design of the initiatives but on the culture that it is embedded in. Cultures emphasizing learning and growth far outpace organizations emphasizing authority, control, rules and tradition.  Leaders need to develop a shared vision to be a “learning organization” that provides the space to understand and accept the realities of the current state, then commit to finding avenues to change toward that vision.  The CEO and executive team have the most influence over changing aspects of the organizational culture. Truly, the executive leader must commit to exemplifying the change that is desired for the organization. Changing the culture is a long-term effort that demands that the Board support it and the leadership team must be willing to both embody the change and provide the Initiative to enact It. 

In Conclusion 

It is the primary duty of the leadership of any organization to create an overall safe, welcoming workplace environment for those of all races, creeds, identities, and ethnicities where everyone’s contribution is appreciated and promoted.  To do this the CEO and senior leadership will need to take that intention and do the hard work of actualizing this by uncovering implicit bias in practices, structures, and allocation of resources and create the platform for all to provide their contribution.  Forward-thinking leadership is now taking up this challenge and leading the charge. 

 


This post was written by Jeff Wyatt
jwyatt@dwhcorp.com | LinkedIn

All companies experience change.
Plan for it with us.

Create a Turnaround
Plan in 4 Steps

No company is without its challenges. In moments of distress, however, the need for serious change can be vital. This is where a turnaround plan can be pivotal. It’s a process of renewal – one that not only identifies key underlying issues within the company but actively implements change at the deepest levels in order to restore health to an organization.

Making decisions that involve change can vary depending on the types of difficulties a company is facing. The turnaround plan should start with the goal of maximizing the value of a company for all stakeholders while transforming it from an underperforming company to a performing company. There are numerous ways to accomplish this which include doing an out-of-court workout, acting as the chief restructuring officer, being a court-appointed receiver, and/or filing for bankruptcy. No matter what option you choose to accomplish your plan, every plan contains these four core steps:

 

1. Identify the underlying issues affecting the company

  • Assemble a team of advisors/advocates for the company. This may include a financial advisor, a CPA, a debtor rights counsel, an appraiser, and/or customers.
  • Assess the Situation. This includes leadership, finance, operations, sales, and marketing. Talk to key stakeholders. Implement a rolling 13-week cash flow model to provide further insights into the company’s financials.
  • Communicate findings with leadership and stakeholders so they can understand, commit, and support the discoveries.

2. Develop a clear, realistic plan that creditors will support

  • Identify ways to raise cash. Options include A/R collections; new sales; vendor payment plans; expense reductions; reduced inventory – sell and don’t replenish; ownership cash infusion; and sale/leaseback of property.
  • Evaluate the company’s lending situation and options such as a forbearance agreement; over formula on the line of credit; and other financing.
  • Stabilize the company – utilize customer communication and relationships; key employee retention plans; maintain employee relationships; communicate with the bank; leadership changes (if appropriate); operational issues addressed – safety, equipment, process improvements, etc.; and financial issues addressed – current financials, inventory costing, etc.
  • Considerations – take into consideration the long-term stress the company has been under; customer frustration; vendor frustration; that COD/Prepays are most likely in place; and an over recognition of the environment in which the company is operating.

3. Validate the plan by ensuring buy-in from stakeholders

  • Stakeholders – revisit who key stakeholders are; present the plan to stakeholders and explain how they will benefit; articulate what the company needs from stakeholders and determine what stakeholders need from the company.
  • Communication – develop a communication rhythm that may include a weekly call with the bank, a weekly review of cash flow, daily/weekly check-in with the leadership team, daily/weekly call with key customers to discuss quality, delivery, and/or funding needs as applicable or daily/weekly call with key vendors.

4. Execute the plan with a sense of urgency

  • Assign responsibility and accountability with due dates
  • Conduct daily/weekly meetings with leadership on plan status
  • Weekly review of rolling 13-week cash flow to drive decisions and actions
  • Measure progress and make adjustments as needed

 

All companies experience performance challenges at some point. If your business finds itself facing some immense challenges, just know that you’re not alone. We work with clients who have questions about what this all means for them, what options and conditions for support or exemptions apply, what implications are for team members, how to mitigate business value erosion, how to manage communications with banks/creditors/vendors/customers, etc. All that to say, we’ve seen businesses make successful turnarounds when they choose to implement a plan.

At DWH, we’re here for you. Feel free to reach out for a conversation on how we can be of assistance as you focus on thriving and not just surviving.

 


This post was written by Heather Gardner
hgardner@dwhcorp.com | LinkedIn

All companies experience change.
Plan for it with us.

 

Understanding Your Cash Conversion Cycle

Group of financial analysts

CCC: What Is It?

The Cash Conversion Cycle (“CCC”) is an important metric used to determine the number of days it takes a company to convert cash outflows (purchase of inventory, manufacturing expenses, etc.) into cash inflows (collections of receivables).  The longer a company’s CCC, the more working capital it will need to fund operations.  This metric is especially important when a company is evaluating the working capital needed to fund expansions, new projects, or growth.

How Is It Measured?

There are three components of the CCC. They include Days Inventory Outstanding (DIO), Days Sales Outstanding (DSO), and Days Payable Outstanding (DPO). The formulas for determining these are below:

  • DIO = (Average Inventory on Hand / Cost of Goods Sold) X Days in the Period
  • DSO = (Average Accounts Receivable / Revenue) X Days in the Period
  • DPO = (Average Accounts Payable / Cost of Goods Sold) X Days in the Period

Days in the Period are determined by what information you are using to do your calculation. For example, if you were measuring your CCC using numbers that reflected an entire year, the period would be 365 days. If you were measuring just a month, the period would be 30 days. Once you have determined your DIO, DSO, and DPO, the formula for your CCC is:

CCC = DIO + DSO – DPO

How Can I Improve My CCC?

It all starts with understanding your current state. What is the first thing you do when you are about to embark on a new journey? You look at a map and figure out where you are relative to where you want to be. You will never be able to measure progress if you do not know your starting point. Calculate the CCC for your company using the most recent financial data and the formulas provided earlier. This is your, “You Are Here,” marker.

Can you recall a time in your company’s history when cash was NOT tight?  What was the CCC leading up to and during that period? How does that compare to your current CCC? How does your CCC compare to the standards within your industry? Use the answers to these questions to guide the goal-setting process. Taking steps to improve your CCC leads to improved efficiencies for the company by converting inputs into cash. The goal is to free up working capital, and with the CCC method, you’ll be able to ensure your business has enough cash for when you need it most.

Identify & Quantify Cash Levers

As you begin to establish cash conversion goals, you will discover a variety of “levers” that can influence cash flow. Some common levers are listed below. After reviewing this list, decide which levers are most relevant to your business. Quantify the impact of each lever to determine the potential impact on cash conversion.

Sales & Marketing Levers:

  • Early Payments – Will any of your customers offer accelerated payment terms? Offer early payment discounts, as necessary.
  • Demand Planning – Can you engage with your customers planning and purchasing departments to ensure you have access to the most reliable product demand information? Structure your agreements in ways that allow you to level load your operations.
  • Discounts & Promotions – Do you have opportunities to offer discounts or promotions on slow-moving or obsolete inventory? Are there brokers available to provide immediate cash for this inventory?  Can any of this inventory be re-purposed for other sales channels or product lines?
  • Selling Excess Capacity – What areas of the business have excess capacity? Use this information to offer discounted pricing as needed to fill this capacity.

Supply Chain Levers:

  • Extended Payment Terms – Request extended payment terms from your key vendors. Remove any early-pay discount programs as applicable.
  • Material Lead Times – Evaluate long-lead material items, seeking alternate sources with shorter lead times, or assist your vendors in reducing these lead times.
  • Optimize Order Sizes – Review your planning and ordering process to ensure you are ordering in the most economical batch sizes.
  • Optimize Order Triggers – Establish parameters around raw material on-hand quantities to prevent excessive buildup of inventory. Set up replenishment systems, or vendor-managed inventory systems that allow you to reduce your liabilities.

Production Levers:

  • Production Lead Times – What are your internal production lead times for your highest-cost items? Look for bottlenecks in the process and find ways to eliminate this buildup of inventory.
  • Minimize Finished Goods Inventory – Establish parameters around finished goods inventory, highlighting areas where completed product is sitting on your shelf for more than a few days.
  • Increase Throughout – Are there bottlenecks in your production process? Use this to determine where you might need to add more capacity (human or capital resources).  Find equipment that is under-utilized, working with the sales team to bring in work that can fill this capacity.

Financing Levers:

  • Asset Management – What assets are available that can be used as collateral?
  • Negotiate Advance Rates – Negotiate with your bank to find the best inventory and receivable advance rates.
  • Micromanage Collection Process – Maintain proper oversight over your AR collection process to limit past due invoices that might become ineligible.

Make a Plan

Decide on a goal and create a path that moves you toward that goal. As with any good plan, make sure you have identified key milestones and assigned appropriate ownership to key elements of the plan. Each element should relate to the identified levers. Work through all the levers you previously identified, adjusting your plan as more information is gathered and as progress is made. Maintain clear and consistent communication within your team ensuring all opportunities are fully explored and executed.  Document and measure your progress along the way. As movement is made, priorities will change and new levers will come into play. Re-establish your current state, set new goals, and repeat the process.

Conclusion

Monitoring your cash flow can often be a daunting and nebulous task. You can use the Cash Conversion Cycle measurement as a tool to objectively monitor your company’s effectiveness in managing cash. Using the tools and steps above can help to significantly improve the liquidity of your business and reduce future risk.

 


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

All companies experience change.
Plan for it with us.

 

Stories from a Financial Advisor

Image of a couch at home

For many people, the idea of hiring an advisor can feel intrusive, threatening, costly, or even downright unnecessary at times. As long-time advisors at DWH, we’ve heard things like…

“I’ve been in this business for 40 years. No one can tell me anything I don’t already know.”
“I don’t want someone I just met telling me how to run MY business.”
“My business is unique, and no one else does things the way we do, so your ‘standard solutions’ won’t work here.”

Although these are common sentiments, we’ve discovered that sometimes the best way to articulate the value of a good advisor is not with clever arguments, but with a story.

First Story: The Couch Maneuver 

I recently went over to a friend’s house to help him move his couch. The house was a bi-level with a small flight of stairs leading to the front door. We transported the couch down the stairs and were trying to maneuver it through the doorway; it wouldn’t budge.  We then stopped for a minute, evaluated the situation, and tried harder.  Still stuck.  After 2-3 minutes, we noticed his neighbor standing just outside the house, entertained by our efforts.  Without hesitation, he said, “move it back up one step, rotate it about 30 degrees and come back down.”  With no better options but to swallow a little bit of pride and take his suggestion, we did as he instructed.  Sure enough, within seconds, we were out of the house, and the couch was in the truck.

This wasn’t his couch, nor was this his house; in fact, I don’t think he’s ever even been inside the house.  He had a perspective we didn’t have that he could use to identify problems we couldn’t see and suggest a quick, simple solution.

Second Story: The Golf Swing

I’ve always been terrible at golf, but for some reason, I’ve noticed this year that I’m getting worse the more I play instead of better.  I was reading articles on how to improve my swing, spending more time at the range, even shopping for new clubs.  None of it mattered.  Still no improvement, in fact, the opposite.  Finally, I decided it was time for me to seek some professional help, so I signed up for an evaluation with a local professional golf coach.

After some brief discussion about the challenges I was experiencing and what I hoped to accomplish, I was directed to a special room with several cameras, four tv screens, and a giant net to hit into.  I was instructed to swing “like I normally do” and hit a few balls into the net.  Cameras from multiple angles recorded my swing so the instructor could then replay the video, dissecting my swing frame by frame.  Every element of my swing, from the setup to the backswing, contact, and follow-through, was compared to a database of “baseline” measurements generated by compiling the average swing of the top 100 professional golfers in the world.  As painful as it was to watch, it allowed me to see how my swing compares to a professional.

I’ve never actually seen my golf swing before, which makes sense as there aren’t exactly a lot of mirrors on golf courses.  Within those 90 minutes, I was able to SEE what was causing that awful slice and begin to make a plan to correct some unhealthy habits.  There was not one magical fix (unfortunately), but a couple of fundamentals that I need to practice, which will start pushing me towards a path of improvement.

Hopefully, by now you can see where I’m going with these stories…

We need trusted advisors in our business (and frankly, in all areas of our life) because a good advisor can provide a perspective only an outsider can give.  They can see things from multiple vantage points (the forest AND the trees) and make comparisons to what the best companies in the world do (a.k.a. “Best Practices”).  A good advisor will leverage the decades of experience you have in your business, or within your industry, to help you see things from a new perspective. And seeing things in a new way is the first step to breaking old habits and creating meaningful change.

When you’re ready, we’re here for you — and for the life of your business.

 

This post was originally written on August 11, 2021, by:
Jeremy Cosby, DWH Partner
jcosby@dwhcorp.com | LinkedIn