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Debt reduction through financial strategy
When a major manufacturing plc had been acquired by a global organisation in a £250m deal, an Oakwood Resources interim manager delivered financial strategy and debt reduction to get the business back in the black.
The challenge:
- Following an ERP implementation seven months prior to the sale, debtors had been neglected and increased significantly with a resulting negative impact on cash flow.
- A lack of strategy and urgency within the credit team had resulted in overdue debt at 22% of total debtors – this represented a historical high. There were significant unreconciled balances in related general ledgers.
- Customer focus had been neglected in favour of fire fighting and dealing with internal rather than external challenges.
The solution:
- A focus on results achieved a significant impact by selecting initial quick wins to gain momentum.
- Undertook a full ledger review to ensure that all doubtful items were fully provided for at audit and to identify key challenges for further analysis and resolution.
- Met with auditors and credit insurers to explain hand over strategy and agreed renewal of insurance cover on existing terms for the acquiree.
The result:
- Post audit a significant bad debt recovery was made with the surplus provision returned to profit.
- Overdue debt reduced to 5% of total which related to a few known issues that could be resolved. GL balances reduced and fully reconciled.
- Successful on deadline handover of the debtor book to the acquiring shared service team at the close of the project with the migrated debtor book 26% lower than at the project’s commencement; this ensured a positive impact on cash flow during the project.
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