DASPV TURNAROUND CASE STUDY
DASPV TURNAROUND CASE STUDY
DASPV TURNAROUND CASE STUDY
TURNAROUND CASE STUDY 1
Retail Co' is a well-known fashion retailer in Central London. It has been trading for over 12 years and has a turnover in excess of 3 million.
SITUATION
1) Acute cashflow pressures with a number of creditors refusing to supply stock.
2) Directors were being advised to downsize by their advisors and to close a shop and reduce headcount.
3) 90% of the company's sales were in clothing but clothing occupied only 25% of the shop trading area in the company.
4) The true trading position had been masked by creative accountancy processes
5) Sales had declined and the gross margin had fallen from over 40% to 23% for the trading year.
6) Stock control was poor and theft occurring internally.
7) Payroll including the directors was running at 75% of gross profit and there were significant trade losses for the year.
8) Significant corporation tax owing
9) Owners disengaged from the business
ACTION
The situation with the Company needed quick decisive action.
1) Contrary to the company's professional advisors we felt that the company should not downsize as this would cause more decline and result in the company failing in the medium terms.
2) As overheads were consistent with previous years immediate attention was focused on how to increase sales and margins in order to restore a balance.
3) A financial controller was brought in to take control of the cash,
4) A cashflow prepared and suppliers communicated with. Management Accounts produced to show the actual trading position
5) Terms were reached to pay the tax monthly over an extended period.
6) The trading sales area for clothing was doubled.
7) Mark-ups in selected areas were slightly increased
8) Discounts below a certain level stopped and a new stock control process instigated.
9) A reduction of the number of stock days by advising that the company bought more regularly but in smaller amounts.
10) Staff were remotivated and the directors as they could see a clear route forward re-engaged with the business and agreed to financially support any short term cash requirements if needed.
RESULT
1) The company's cash positivity was restored very quickly and a substantial amount of the losses were recouped before the end of the trading year.
2) With the new buying policy, cash under control and suppliers communicated with the intensity of the pressure has reduced dramatically allowing the directors to increase their focus on sales.
3) A new financial controller has been employed to take over the day to day running of the accounts.
4) The company is now stable and profitability restored
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