Case Study 1 - Mid size fast growing technology company

Client Situation

Medium sized information technology company delivering integrated systems to the health industry. The company had been growing from a small base over the last 4 years at between 40-60% revenues, year on year. There were many larger interested multi nationals interested in acquiring a share of the entire business.

Background

The CFO had grown up with the company from the beginning and had a close relationship with the CEO. The CFO ran finance by spreadsheet, using only a very basic general ledger package and hired very under qualified resources to work in the finance function. When dealing with the CFO it was clear, you would only hear about the good things and be constantly steered toward a number of very complex looking spreadsheets.

The organisation had already incurred significant penalties for non-compliance and late filings in the prior year and the CEO had no idea of what might happen in the current year. The CEO also had no, or little access to information and the CFO tried to control as much information as possible, making each report an exception.

Challenges facing the client:

The client had to work through the following challenges:

• CFO with deep relationships at CEO level
• Increasing frustration at the executive team level, mostly made up of new members
• Lack of information to run the business and the reports available tended to have errors
• Reporting cycle of around 20 days
• Lenders becoming increasingly concerned about cash flow and the lack of reports required.
   

Key outcomes:

• Reviewed all compliance requirements and began negotiations with all relevant parties. This included revenue services, staff benefits and local government
• Completed a weekly cash flow document which could be updated weekly to assess the cash requirements and to begin limiting expenditure
• Reviewed key business processes including payroll, revenue and purchasing, to find internal controls non existent and processes inefficient
• Recruited a new CFO
• Focused of delivering information to the organization.
   

Result

• High penalties paid, resulting in additional calls from private investors for funds.
• Refusal by CEO to take on technology and internal control recommendations, due to the potential impact on culture.
• Investors converted debt to equity, replaced the CEO and reduced the workforce by 20%