Case Study – LX Wholesale Limited
LX was an electrical goods wholesaler who supplied, amongst other customers, some large 'shed' retailers who in turn had complex rebate arrangements and EDI systems in place. The incumbent FD was inexperienced in this sort of business and took his eye off the ball on these elements, which created a major funding problem – the major debtors were not paying and he did not know why. The lenders – in particular the main bankers – were becoming increasingly nervous at the funding profile.
What Happened?
Urgent introduction of an expert back office resource to identify the issues and, hopefully, find an appropriate strategy to save the business. The team quickly identified issues around rebates/EDI. Action recommended to bottom out the problem (close liaison with debtors to reconcile their positions on invoicing, rebates and debit notes). Also suggested and implemented changes to internal processes and procedures in this area and others. Liaised with the main bank to stabilise concerns and deliver a transparent picture of the situation/ timeframe for a normal position to be restored. Also worked with the bank and the business to install an interim FD to execute the plan (who became permanent in due course). Finally, back office team stayed on site for two months to execute the agreed plan and supervise the recovery of the problem. Business survived and continued to trade.