Symptoms:
Further Education institution in long term financial decline ostensibly as consequence of reduced Government funding. Long term financial health deterioration resulted in institution being placed in ‘special measures’ regime requiring development of new business plan to turn performance around within three years.

Diagnostics:
Rapidly reviewed impact of funding cuts on revenue model, also measured key financial cost metrics. Examined Management Accounts, budgets and strategic planning documents. Met individually with all members of Management Team.

Underlying Issues:
Costs had never been analysed in any meaningfully way or benchmarked – within and without of the sector – resulting in the Senior Management Team believing that the cost base was a ’given’ and no substantial reductions could be achieved without loss of teaching effectiveness. Inefficient practices and poor cost controls were embedded throughout the organisation. Forecasting and budgeting were traditionally very weak and ineffectual, although very costly and time-consuming. Financial management literacy of Senior Management Team was very weak.

Solutions:
Developed cost model based around ‘best of breed’ metrics, built alternative cost models across multiple scenarios, identified historic inefficiencies borne of an ill-conceived merger, set out detailed recommendations for turn around over two years for consideration by Governing Board. Implemented new budgeting and expenditure control processes. Ran coaching programme with Senior Management Team and Budget Holders to address financial management weakness. Special measures regime was removed after eighteen months instead of three years.

Symptoms:
Charity experienced deteriorating financial performance coupled with failure of long term sustainable income generation model.

Diagnostics:
Early and quick reviews consisting of interviews with Management Team and Finance Personnel, review of strategic plans, budgets, management accounts and cash flow forecasts.

Underlying Issues:
Strategic and Operational Plan not integrated with budget resulting in Organisation committing to uncosted, unfunded plans. Management Accounts too complex and poorly understood by Management Team, budget holders lacked training and confidence, and received little useful or timely information. Cash flow reports never monitored.

Solutions:
Worked with Management Team on combination of short term and long term measures designed to halt the immediate deterioration whilst re-building the planning and reporting capability. Introduced immediate liquidity management and expenditure controls, redesigned and simplified Management Accounts pack, introduced key non-financial performance metrics based on Critical Success Factors, developed alternative funding model, ran training seminars for Management Team on understanding financial performance, ensured Strategic and Operating Planning process was integrated with budget. Major operational improvements achieved without loss of focus on core outputs, financial planning and performance transformed.

Symptoms:
Small service company with modest turnover established three years ago was failing after initial strong showing, losing customers following onset of recession. Cash flow was weak with bank and statutory creditors applying pressure.

Diagnostics:
Detailed discussions with founder-owner, interrogation of ledgers, segregation of variable from fixed costs, building realistic cash flow forecast, understanding business lifecycle covering period from outset of client contact through contract award, delivery, invoicing and collection.

Underlying Issues:
Pricing model not realistic, break-even analysis non-existent, all existing business assumptions too optimistic, cash generation lifecycle not understood, budgeting and forecasting non-existent, cash management incredibly short term, failure of owner to understand how his accounts were being interpreted by bank.

Solutions:
Rebuilt business model based on very cautious assumptions, worked on revising business processes to shorten cash generation lifecycle, worked through revised break-even model, created detailed integrated budget covering profit & loss, balance sheet and cash flow, met with bank and statutory creditors, presented revised business model demonstrating how outstanding obligations would be met, reached agreement on keeping business alive without reduction in working capital loan facility, created opportunity to trade out of current position.