The Business: A fuel distribution business in Nth Qld with $45M PA sales covering a wide geographic delivery service including roadhouses, serviced with a fleet of B-Doubles, Road Trains and barges.
The Brief: As Project Director and Board Advisor conduct an urgent analysis on the business to identify the financial status and cause of poor cash flow and define a turnaround strategy to stabilise the business as the 1st stage. The Directors were requested by the Bank to conduct an urgent review, with an external insolvency practitioner on notice, after the external accountants were unable to assist.
The 2nd stage was to implement the strategy and operational and administration improvements to stabilise the business and to reduce cash loss.
Background: The business had been steadily growing and implemented an extensive fleet replacement and asset refurbishment program via bank debt and leasing with multiple lenders. The business was exposed to major seasonal influences where annual weather conditions directly influenced sales, product mix and cash flow. No cash flow projections were developed to confirm the ability to service the debt. The business had 7 reporting entities and had changed finance software from Reckon to Xero at the beginning of the financial year, but without proper coordination and control.
The business concurrently also implemented debtor finance to advance cash flow due to revenue growth. However this was not being effectively monitored and inter-company drawdowns resulted in a breach and the facility was halted for 4 months directly affecting cash flow at the seasonal downturn.
The internal accountant left the business without notice at this time. Management accounts were now 6 months behind. The Directors had been highly reliant on the internal accountant.
The scope included:
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Conduct fast paced investigation to provide a snapshot of the situation and identify a potential turnaround strategy.
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Identify surplus under-utilised assets for sale to generate cash.
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Develop a project plan and provide support resource to clear backlog on management accounts.
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Develop an asset register to identify book value, market value, debt, loan repayments, location and which entity owned and paid for the assets. This assisted refinance decisions and provide key inputs to complete management accounts.
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Set up working capital dashboard to monitor and control cash position with debtor finance & AR & AP status, prior to management accounts being reliable, and to assist to pin point decision or event points which affected cash flow.
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Develop a daily sales graphical dash board to identify sales performance and gross margins and integrate with published Terminal Gate Pricing data and compare to budget. The dash board evolved to include gross margin by customer and product type and assisted to identify unprofitable delivery routes. The data conversion was extracted from Xero and converted within Excel to provide daily, weekly and monthly KPI’s.
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Develop related entity and supply chain map to assist operations and financial assessment.
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Develop financial projections and cash flow models and to model decision scenarios.
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Develop month end procedures and activity tracking with traffic light control to reduce month end lead times. Management accounts for the 7 BU’s were finally achieved within 3 weeks of month end.
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Critique and improve existing month fuel inventory stocktake practices and stock valuation to determine accurate COGS. Prior data sheets were inconsistently valuing inventory with and without GST.
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Develop succession plan and organisational development plans for key staff and processes.
PACE Outcome Assessment.
Using a Problem, Assessment, Corrective Action, and End Results framework, the review of the project headlines are:
