The company was a third generation family business manufacturing and distributing sportswear garments from its premises in Yorkshire. The business was quite profitable but had no concept of financial controls and financial reporting. There were no management accounts and no ability to understand where the profitability lay. Underlying this was also the two brothers thoughts of an exit in three to four years time. The auditors suggested my recruitment, initially on a six month contract, to implement all the normal financial controls and reporting including developing a costing system and providing an accurate stock valuation.
Assisting the owners with understanding the need for financial reporting and financial controls and providing them with an understanding of how to use and interpret the results. Also implementing such systems into an environment where none of the management were in any way financially aware including the Financial Controller (senior bookkeeper).
Being asked to stay on at the end of the initial project to take control of grooming the business for exit.
Sourcing the finance and leading an MBI myself thus creating the exit the owners required.
The development of straight forward management accounts was relatively simple, however it became clear that the in house written financial systems (nominal, purchase and debtor ledgers) were absolutely bug ridden and nothing added up correctly. The purchase and debtor ledgers did not agree with the nominal balances and the nominal ledger itself did not balance. Sales invoices were not necessarily hitting either of the ledgers correctly and there was no consistency in the errors.
The implementation of a standard Sage solution to replace the ledgers was rapidly undertaken, and aided by the retirement of the Financial Controller, accurate management accounts were generated. A costing system was developed from scratch and linked with the writing of a budget, the following control reporting was developed:
- Variance analysis
- Product profitability analysis
- Factory efficiency reporting
The ongoing reporting was used to verify the validity of the costings. In addition stock procedures were improved and stock was being correctly valued for the first time.
There was a significant amount of work undertaken to get the business ready for exit. The market was very competitive and new entrants were emerging in the form of international brands. Prices were being driven down and it was clear that the business could not just rely on its past reputation. Working closely with the younger of the owners the following were achieved:
- Significantly improving production planning and forecasting linked with improvements in stock control procedures reducing stock outs and improving delivery performance.
- Closure of the garment manufacture and re-sourcing overseas. This involved seeking out new suppliers, garment development to ensure the quality standards the business was known for and achieving continuity of supply at the right price.
- Implementing a new computer system based on Microsoft Navision. Developing very sophisticated logistics and stock movement procedures, reducing headcount significantly.
A business plan was written and presentations to a variety of funders resulted in the necessary funding being sourced to enable the MBI to be completed. Further improvements to the business were undertaken and the following achieved:
- The business was moved into modern warehousing allowing further improvements to stock control resulting in Customs Approved warehousing status being achieved.
- Re-sourcing of garments was continued finding new improved suppliers in terms of quality, price and delivery performance.
- The sock manufacturing was closed and two suppliers in China developed.
- The brand was expanded successfully into other sports to allow the expansion of the business.
Sponsorship deals with professional clubs in a number of sports were concluded.
The business remained both competitive and profitable throughout and was able to maintain its number two brand status against very serious internationally recognised competition.
Its reputation for quality and delivery performance was significantly enhanced and could not be surpassed by any of the other brands in the market.
The owners were able to achieve an acceptable exit
Case Study: Doug Bedford