According to the Wall Street Journal, 60-80% of business owners don’t know what their financial statements are telling them. I know what you’re thinking. “That’s not me.”
As a pre-requisite to a renewal on a critical line-of-credit, this Chicago CNC Machine Shop’s bank required an outside review and verification of the company’s questionable financial reports and financial stability.
Our changes allowed the company to improve the bottom line. The bank renewed the company’s line for another year.
As a result of our success, the company hired us as their Part Time CFO on an ongoing basis so that we could provide continued counsel to the company as it was passed down to the third generation of the family.
Frustrated owner of a Chicago equipment rental company hired CFO Simplified to modernize and bring the company’s accounts payable department up-to-date. Prior to our intervention, financial reports were slow to produce and prepared manually, as the long-term AP clerk was working overtime, utilizing an antiquated accounting system to pay suppliers who were anxious for their payments.
Letting the computer decide which invoices to pay allowed us the time to provide better documentation to the owner prior to check signing. The time needed to complete the payables process went from more than 5 days a week to just 2, and payables checks were mailed out reliably every Friday.
After working through the approvals and processing with each department, we were reliably issuing monthly financial reports in less than 10 days.
By applying automation to the AP clerk’s repetitive, manual, and cumbersome processes, she was relieved of time consuming tasks that affected her ability to deliver accounting service delivery. With automation, more time and reliable information, the finance department and owner can make any adjustments necessary to meet the changing needs of today’s dynamic business. As an added benefit, they can also catch any errors or other issues before they become material misstatements.
CFO Simplified was hired to help this Franklin Park company who was overdrawn more than $100,000 at the bank, and more than 4 months behind on critical obligations such as lease, mortgage, real estate taxes and other loans. When we intervened they were days away from foreclosure and short on payroll.
With more money to operate the business, morale and production quality improved. Unfortunately though, the company was burning too much cash. The owners agreed to an Assignment for the Benefit of Creditors, with the goal of keeping business operating so we could sell it as a going concern. In the end, a holding company located in Carol Stream agreed to purchase the assets of the company.
A Benefit of Creditors allows the company to avoid a Chapter 7 or 11 bankruptcy. With our approach, twenty three jobs were saved, and the owner was retained/hired by the holding company. The bank loans were paid in full, and the owner’s personal guarantee was released. The banks refinanced the building, now that there was a viable tenant. The company continues to operate successfully to this day.
This 28 year old Wheeling, IL company had never created a budget. They had no idea of the expected profitability of any of their nine separate product lines, or the overall profitability of the company.
-Sales and administrative expense.
-Bonuses and pay increases
A trend analysis is crucial in gauging the financial health of a company with multi-product lines. In actuality, the owner didn’t know whether any line was becoming a cash cow or boat anchor to overall company profitability. With all of the financial information measured and analyzed, future trends, per product line, can be projected. Our resulting report detailed the metrics that we used in our analysis, along with the historical sales and margin contribution of each product line to the company’s overall profitability.
After decades of operating without a budget, the company now had an actual budget with supporting detailed analysis (spreadsheets), providing an expected profitability for the company and each product line for the upcoming year. With our intervention, the company could, for the first time, look into the future and confidently make plans based on the detailed analysis and projected profitability of company operations.
A small Chicago advertising agency specializing in niche marketing was having difficulty producing consistent financial reports, further causing inaccurate invoicing and revenue reporting, leading to undo stress on the financial department with duplication and other tedious month-end processes.
Having accurate business metrics leads to accurate cash inflow/outflow numbers and ultimately increases the ability to improve and maximize profitability. We helped this client get on the right track for success by streamlining and improving accounting processes on a “per project basis”:
Successful Schaumburg Marketing Services Company needed us to perform due diligence and assist with an acquisition. Through the course of our advisory services and relationship, we discovered that the business is a family business owned by two brothers in their mid-60’s, each having children working in the business with no succession plan in place, of which we strongly advised and also assisted with.
Succession Planning Results: According to surveys (PWC), as many as 8 out of every 10 boomer business owners are facing retirement without a succession plan, as most of their time is spent working in the business, vs. on the business. Without a succession plan, unfortunately 70% of family businesses won’t make it to the second generation. And, in the case of family businesses, the people and their issues are a majority of the bigger picture. With the assistance of our experts, CFO Simplified put together a qualified team to evaluate the bigger picture of this family business. As a result the new succession plan we drafted eliminates any uncertainty and discord that may occur later, and increases the likelihood of continued success of this family business into future generations.
M&A Advisory Results: To mitigate risk, an acquisition requires than an enormous amount of data (financials, taxes, accounting, labor, etc) about the target be evaluated. Our expert and unbiased evaluation determined that one of the companies was a good fit, both business-wise and culturally. It was also determined by the buyers that other company fell short of being the desirable target they had anticipated, and any plans regarding its acquisition were discarded.
Overall, our expertise helped these buyers avoid a large risk in one target, while also successfully negotiating mutually satisfactory contracts with the suitable target. In this transaction, it was important for the seller to know that their employees would be taken care of, they were being paid a reasonable price for their business, and that they would be working for the next few years, assuring a successful and profitable transition, and acquisition result. As for the buyers, they were delighted to have acquired a new business segment that enhanced, complemented and augmented their existing clientele and bottom line.
A bank was losing confidence in this second generation Harvard, IL printing company, after a disastrous relationship with a new client caused it to lose money over the prior few years. The company was worried their operating line was going to evaporate if they were unable to return to profitability.
An ERP system eliminates repetitive processes within an organization and increases efficiencies, especially profitability forecasting abilities. As a result of our review and intervention, and a change at the operational level, the tracking and calculating of month end financial adjustments for prepaids and accruals tightened the financial postings, eliminated adjustments at year end for the annual insurance audit, and uncovered a miscalculated insurance accrual that returned $140,000 to the bottom line.
In addition, having accurate detailed financial statements gave the owner vital information needed to make further changes in the company’s operations and dramatically improve profitability.
After purchasing a Chicago retail liquor store from his father, this young new business owner wanted to expand into other businesses. He hired CFO Simplified to teach him more about the store’s financial reports and how to utilize them and the store for his other business ventures.
It’s difficult to measure the progress or strength of any retail outfit without tracking certain sales metrics. Having this information in hand allows the store owner to accurately gauge profitability, and even take steps to improve his ROI.
In addition, having a more accurate and structured month end close, with the appropriate journal entries, also provides the owner with vital and consistent financial information needed to understand how the store is doing on the whole, and to serve his purpose of using the store as collateral to expand into other business ventures.
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