Distribution --Furniture Wholesaler
We were referred to the shareholders of a designer, importer and wholesale distributor of bedroom furniture located in the Piedmont Triad area of North Carolina by their attorney. The company was losing money, the company's lender expressed concerns about renewing its credit line and the shareholders were looking for guidance in dealing with these issues.
A quick analysis of the situation showed that with sales declining there was far too much inventory on hand, on order and in transit from its Asian suppliers. Expenses were too high for the level of sales that were projected for the year. The solution involved the preparation of a detailed cash forecast for the balance of the year that was integrated with schedules showing projected sales, collections and accounts receivable balances and similar information for vendor orders and payments, new product orders and shipments and related inventory levels, payments for freight, loan balances and borrowing availability. Using the information derived from this analysis a detailed action plan was developed that included targets for expense reductions, programs to motivate and incentivise the sales rep organization and most importantly schedule inventory reductions to bring the operation back into balance with forecast sales levels.
The plan and projections, which showed that the company would build credit availability by the end of the year, were shared with the company's lender. The availability of the level of detailed information that the lender then continued to receive from the company on a weekly basis eased the concerns of the lender who agreed to extend the credit line to the company. The information also provided the lender with the means to monitor the company's performance as it moved forward.