Case Studies

Managing cashflow for a design-&-build contractor

Background

For 25 years the company developed a strong reputation by designing and building steel-frame buildings mainly to agricultural customers. Aggressive growth included diversifying into commercial and industrial buildings, small maintenance and insurance works, and sub-contracting for major projects such as city centre redevelopment. Operational and financial processes were inadequate to cope with the growth and that, plus slow payments on major contracts, led to a severe cashflow crisis.

Spring into action

Andrew Rigby joined the business as interim FD as the crisis came to a head and saw that no meaningful financial numbers had been prepared for some time. He met the bank and auditors and quickly achieved their and the directors’ requirements by providing a snapshot of the financial position. He then maintained regular contact, particularly with the bank, to give confidence that the situation was being handled professionally.

Crisis management

Andrew then developed cash flow reporting and cash management tools to help manage the crisis. This involved daily cash meetings with directors to decide payment priorities, mentoring the accounts team who were dealing with supplier calls and working with the internal quantity surveyor and customers on collecting cash. These actions helped the company avoid breaching its banking facilities and continue to operate.

Improved reporting

Andrew implemented monthly management reporting, which included development of contract profitability reporting to give the business visibility of its financial performance, which it had completely lacked previously. This involved agreeing with the board a measurement of profit on long-term contracts and working with a system that was not designed for the construction industry.

Company Voluntary Arrangement

After several months it became clear that a customer was not going to make full payment under a major contract and the cashflow situation was unsustainable. With the help of BDO, the company entered into a CVA, agreeing to pay creditors a portion of monies due to them over five years. This allowed time to prepare a legal challenge to recover unpaid amounts on the major contract. It also allowed time to attract new investment. Andrew managed the financial aspects of the CVA throughout the process.

New management

An experienced group from the construction industry invested in the company and took positions on the board. They appreciated the excellent reputation of the company but recognised that operating processes were inadequate. Andrew helped them implement best-practise reporting, including development of a tender forecasting system to understand cash in the pipeline.

New systems

The company’s accounting system was a standard package unsuited to the construction industry. Andrew selected software tailored to the industry and took the lead in implementing it. The system successfully went live, on time and on budget, after an eight-week implementation project.

Ongoing support

Andrew continues to provide support through FD Solutions, as part-time head of finance.