Forecasting Cash Flow & Enhancing Working Capital
The carve-out of a $100 million pipe coating company acquired by a new sponsor led to the need for a complete assessment of the treasury function, as the former parent company had previously managed all treasury processes and would only be supporting short-term through the TSA. Accordion worked with the sponsor and management team to understand the pipeline/backlog detail and forecast methodologies of the Company to build out a robust 13-week cash forecast. Accordion also provided a complete assessment of the treasury function and implemented recommended best practices to stabilize the order-to-cash, record-to-report, and procure-to-pay processes while enhancing the month-end close process.
13-Week Cash Flow Forecasting
Working Capital Improvement
Process & Controls Implementation
Led the implementation and stand-up of the treasury function for the newly carved out entity, with a focus on effective cash forecasting and reconciliation tools:
- Validated historical cash movement, splitting out cash flow streams between former parent and newly carved out entity and implemented a daily cash reconciliation process.
- Designed, developed, implemented, and trained the management team on a robust 13-week cash flow model with built-in weekly variance analysis for actuals vs. forecast and toggle capabilities for key cash flow scenarios (i.e., shifts in backlog/pipeline timing, gross margin changes, and DSO/DPO adjustments).
- Worked along side the sponsor and management team to create and maintain a pipeline tracking tool.
Improved working capital per the Sponsor’s request:
- Worked with the project management team in the field to understand the invoice generation and delivery cycle.
- Tracked and documented of negotiation with key vendors to improve payment terms.
Accordion played a key role in implementing the proper treasury processes to maintain real-time reconciliation of cash, effectively track actuals to forecast, efficiently invoice customers, and expand terms with key vendors. Our team drove treasury procedure improvements to immediately enhance working capital. As a result of the engagement, the ten largest vendors (approximately 60% of total spend) confirmed adjustment from 30-day to 60-day terms; all vendors and customers with over $25K of annual cash spend/receipts to ACH were transitioned to further automate cash flow; the DSO improved by approximately 20 days with change in billing process to generate monthly through accounting based on percentage of completion with project manager approval and delivery to the customer within 5 days of month-end; and a daily cash reconciliation file was developed – providing a daily cash forecast for the future 3 weeks to verify timing of large customer receipts and vendor payments due and significantly reduce reconciliation timing at month-end to expedite the financial statement close process.