Providing Visibility into Short- and Long-term Liquidity
A $1bn revenue e-commerce company was facing annual sales declines in each of the past three years, resulting in a 40% reduction in EBITDA over that period. As a result, the highly levered company was in an urgent liquidity situation. The Company’s current cash flow forecast was not detailed or reliable enough to give management and the board proper visibility into their future liquidity and availability. The Company required a tool that would provide a detailed short-term and extended view of cash and availability. Accordion’s Performance Improvement team was selected to be the go-to partner for this engagement.
Actionable Business Analytics
13 Week Liquidity Forecasting
- Met with CEO, COO, Head of Finance, and Sponsor to understand current pain points and align on desired results.
- Coordinated with internal stakeholders within finance, sourcing, and purchasing to develop a base of knowledge on current forecasting processes.
- Reviewed current inputs and understood data availability and format.
- Designed and created a stand alone internal cash and liquidity forecast model with improved forecast methodologies and dynamic update capabilities for receipts, AP and PO activities.
- Implemented direct data inputs and incorporated information that was consistent with the Company’s current source files to ensure the model could be easily updated.
- Incorporated debt provisions and borrowing base calculations to forecast availability.
- Built scenario testing functionality into the model.
- Teamed with management to iterate model and compare to the Company’s forecasted and actual operating results.
- Implemented a new weekly cash and liquidity reporting framework and led weekly update meetings.
- Partnered with Treasury team to ensure a smooth model transition, providing a detailed Users’ Guide for training and reference.
Accordion provided much needed visibility during a time of critical liquidity. The Company and Sponsor now have the ability to project and identify periods of tightening liquidity over the next eighteen months. The model provides various stakeholders with the insight and analysis necessary to monitor the situation and drive informed decisions. It further allows the Company to proactively take corrective actions as needed to improve results.