Landscaping business with poor financial support
A small landscaping business was experiencing an extremely poor service from their outsourced finance provider. The effects were devastating, profits recognised were overstated, stocks incorrectly valued, the balance sheet had not been reconciled, all of which led to a large write off and turned what had appeared to be a great trading year into a loss. The resultant focus led to the Managing Director’s attention switching from sales to fire fighting and finance; not his primary skill set. The pipeline for the business dropped and with it the cash inflow, taking them to the brink of failure. Luckily for them they were part of a much larger group who could support them; however, the support was not limitless and covenants on them were a potential issue, the business needed a cash injection of £150k to see them through to March of the following year.
Engaging Leonard Business Services
Leonard Business Services (LBS) was approached to take on the finance support having been recommended by someone close to the business investors. After initial discussions it became clear that the most urgent area needing attention was control of the day to day finance activities and to demonstrate quickly that this had been done.
1. Training & management accounts
Via face to face sessions and telephone support, LBS set to work in doing training onsite for non-finance staff on how best to do their parts in processing. The LBS team mentoring and processing more complex transactions and doing a full balance sheet reconciliation. The relationship with the previous supplier of services had broken down so LBS had no real access to previous workings or papers so everything had to be created from scratch and in the end LBS also retro create management info for the period prior to engagement because it was discovered that this had not been done either.
Four weeks after engagement a fully supported set of management accounts were provided to the board of the landscapes business and their parent; separately outside of scope with LBS the business had also submitted a paper to support the request for £150k from the parent.
2. Director support
Part of the services provided to the landscape business was director support during the initial weeks of engagement, a series of calls and analysis were carried out the focus being on developing trust between the two companies and to begin mentoring the MD during this time. The MD became more confident that the finances of the business were now being taken care off and that he could step back and leave LBS to their work. Working with an advisor from LBS, the MD was able to prioritise his workload, firstly to improve focus and activity on the cash collection which was to be carried out by the commercial team of the business, LBS defined processes and ways of working to support the commercial team in doing this and to give greater clarity to the projects themselves and how they were identified within in the business, secondly he was able to focus on the pipeline of the business which contained several projects which had not been closed.
The effect of this increased focus was phenomenal by the time the 2nd board meeting attended by LBS arrived the landscaping business was able to report that their cash flow was now showing that whilst it was still likely that support may be needed from the parent it was not needed in the next 6 weeks, this was a mammoth positive step for the landscaping business because it had become apparent that the parent company may not be able to offer simple cash injection support due to the covenants in place on its own facilities.
3. Corrective work and continuous improvement
During the following month further investigations, analysis and corrective work was undertaken by LBS further embedding the team into the business as part of their organisation setting in place a continuous improvement basis for the processes and controls and work began on looking at how to digitise the complicated applications for payment process that remained totally manual and thus open to simple errors in data entry. From this work came further intelligence to support further credit control activities and improving cash inbound. The MD supported by LBS was now able to ensure that payment terms were more advantageous to the business were agreed up front and he was given the confidence to be able to qualify out jobs that he might of accepted just 3 months prior but which would have damaged profitability potentially in the future.
By the time the third board meeting came around the business was able to present full year accounts which although did contain additional write offs such was the confidence in the controls and reporting at the landscaping business that this was accepted with minimal challenge, and more focus was on the new budget which the MD was able to present a plan for which over 70% of the revenue projected was already covered by contract, and over 20% of the remainder was covered by projects quoted to the parent company. Furthermore, the business was able to state that whilst cash flow continued to need constant control and management that the near view and the long view cash flow forecasts both demonstrated that baring some act of force majeure it did not foresee any requirement for further support from the parent company and in fact projected a start albeit small to repaying historical inter-co debt.
The timeframe shown in this case study is probably the quickest that LBS has been able to demonstrate its value to customers, however the outcomes are not at all out of the ordinary. LBS has shown on numerous occasions how its integrated approach to finance support, an approach that interfaces with the whole of the business, addresses businesses real pain points and supports the management teams in a way that allows them to focus on their own key skill sets ultimately ensuring that businesses move forward.
Financial outsourcing service – three months in
“Having worked with LBS now for 3 months following them being recommended when we were in need of someone to step in at short notice to take over the accounting and financial management role here – a big ask!! Using their vast experience, skill and diligence they have quickly and tirelessly worked to gain a full understanding of the Business finances, the Business itself and introduced robust procedures and methods of work instantly improving the efficiency and productivity. Their communication skills are excellent with every level and their dedication is beyond measure. As well as controlling the financial management, their guidance and support in both operations and strategically has already made them an invaluable asset to me and the Business. The staff are very personable and wonderful to work with, with their plain talking, nuts and bolts, never to be beaten attitude. I would recommend them without any hesitation.”
MD of Landscaping Company, September 2019