Cash flow planning by our Consulting team and surplus asset sales clear $4 million in business purchase debt in a single year, saving over $500,000 in interest.

Background

After recently purchasing a successful business in the mining services industry, all key staff in the business continued their employment under the new company Director, with the exception of the Chief Financial Officer. The Director had ambitious plans regarding the growth and profitability of the business, and identified the need for advice in order to achieve this, so the business engaged with Lambourne Partners Consulting to provide ongoing financial management support under a Virtual CFO arrangement. This included a half day every week to be spent on site at the business.

How We Helped

In the initial stages of the engagement, we investigated the financial health and position of the business. We implemented a regular reporting regime to provide essential information to all managers and stakeholders. We implemented a job-based budgeting model, and instituted regularly reviewed short and long term cash flow planning.

During this period, interest rates on the business’s debt began to rise from around 6% to almost 10%, materially affecting the return on the Director’s investment in the business. We identified that there may be an opportunity to exit this debt with an appropriate strategy.

After identifying this opportunity, we worked with the Director and key high level managers to develop appropriately diligent cash flow controls. We engaged with key suppliers to enter into clearer payment arrangements and negotiated faster payment timeframes from the largest clients to unlock additional upfront capital. Assets were identified both in the business ad for the Director personally that were surplus to their business operational and wealth goals, and we made recommendations for the sale of these assets, facilitating meetings with trusted brokers and sales agents on the Director’s behalf.

Outcomes

After implementing the cash flow strategy and receiving funds from the clearance of assets, we were able to pay out the bank debt on the purchase in full to a value of $4.2m.

Based on the interest rate at the payout date, paying off the debt early resulted in interest saved over the life of the loan of $539,512.

Contact Lambourne Partners Consulting

To get in touch with our Consulting team, please contact us below or call 02 4969 6600.