A distressed company with a successfully negotiated forbearance agreement, expiring in 30 days, needed a CFO to step in to re-align the cost structure and negotiate the
refinance of their loan. The Company required someone who could quickly step in and get up to speed. They reached out to CSuite to provide a CFO who could take the lead on the renegotiation.
The Challenges
The company was facing a perfect storm of internal and external financial pressures:
- Plummeting Sales: Sales were projected to drop by over 35% in the next two years.
- Inaccurate Financials: The company’s financial statements were not in compliance with GAAP, with significant errors in revenue recognition.
- Cash Flow Crisis: TThe company was out of cash, and past-due payables threatened the supply chain.
- Forbearance Agreement Expiration: A forbearance agreement was expiring at the end of the month; a default would result in the lender assuming control.
The Solutions
CSuite’s CFO quickly implemented a series of strategic initiatives to stabilize the company’s finances and get it back on track:
- Cost Restructuring: Restructured the company’s costs to align with the sales forecast to enable profitability
- GAAP Compliance: Financial reporting procedures and controls were established to ensure consistent and accurate financial statements.
- Improved Cash Flow Forecasting: Enhanced the accuracy of the 13-week cash flow forecast, enabling the company to develop payment plans and keep the supply chain running smoothly.
- Re-negotiated Forbearance Agreement: Revised, accurate forecasts were used to successfully renegotiate the Forbearance Agreement to solve the company’s short-term cash issues.
The Outcome
Thanks to CSuite’s strategic guidance, the company experienced a remarkable turnaround. Despite a 37% decline in sales, the company was able to turn a loss of 11.6% to profits of 2.9% and 5.9% in the next two years. With the revised cost structure and accurate forecasts, the company was able to attract a new lender, receive an infusion of
additional equity and attract a new C-level executive staff to take the company to the next level.
Conclusion
This case study demonstrates the critical role that an experienced CFO can play in navigating financial distress and driving a company toward profitability. By aligning cost structures, ensuring financial compliance, and improving cash flow forecasting, CSuite helped this manufacturer stabilize and thrive in a challenging market.