BUSINESS PROFILE:

An importer of arts and crafts products from China for sale into the education sector

GOALS:

To improve the profitability levels of the Business, thus moving it from loss to profit.

THE CHALLENGES:  

The Business was operating on a faulty business model. It was buying on spot deals in $’s and selling on fixed price 12 month contracts in £, therefore leaving it seriously open to the effects of currency fluctuations that were negatively impacting the differential between buying and selling prices.

The Business was also £200,000 in debt.

THE STRATEGIES:

A comprehensive review of the Business’s finances was undertaken and this very soon highlighted issues:

It was clear that the accounts were not a true representation of the Business’s position. It was therefore decided to change accountant.

Serious problems were also found with the financial records and it was further decided to employ a new book keeper.

As a consequence of these actions, the Business now has accurate accounts and receives sound management information to monitor against a 12 month budget and has implemented monthly reporting.

Payment plans were put in play to manage the debt position.

Stock levels were reduced by 25% to help improve cash flow and reduce the exposure to currency fluctuations.

Customer contracts were reviewed and a policy of systemised sales pricing increases implemented. Although there was a small drop off in customers, the remainder are now profitable.

THE OUTCOMES:

The Business has moved from recording a significant loss in 2010 to a small profit in 2011, with expectations for continued growth in profitability in 2012.

The Business is also significantly less exposed to currency fluctuations than before. Furthermore, with improvements to the operational and financial management in place, the Business is now on a sounder footing going forward.