case studies

Rapid expansion leads to near-collapse

An organisation founded in the 1990s had 2 successful divisions.  It decided to expand by opening 2 new divisions targeting different market segments.  The 2 new divisions started to grow but were affected by all the normal growing pains and the fundamental problem that, although they were both growing, neither had reached break-even after 4 years trading.  This placed severe strain on the organisation’s cashflow and it found itself behind with PAYE, VAT and pension contributions.  Two quarterly loan repayments had been missed and it was using an unauthorised bank overdraft.  This is a collection of serious problems. 

The bank demanded action. Its preference was to close one or both of the new divisions.  This would have been a very easy solution and a number of potential turnaround advisers were in favour of this simple way out but it would have severely damaged the client. 

We worked with the client, the bank, the creditors especially HMRC and the pension administrator and with the operational heads in order to put this situation right.  This turnaround took 18 months ( a lot longer than it would have taken just to close or sell the new operations) but in that time we managed to:

• Negotiate a manageable time to pay arrangement with HMRC for overdue PAYE and VAT and clear the liability
• Agree a similarly manageable time to pay arrangement with the pension administrators for overdue pension contributions
• Help re-build the finance department to better manage budgets and cash flow
• Recover £140k from a former Finance Manager who had defrauded the organisation
• Bring the overdraft within its limit and catch up with the overdue loan payments
• Help the client implement a re-financing package that reduced bank borrowing and debt service costs

As a result of this the organisation was able to continue to grow and deliver its services. 

Individually all of these problems are relatively small and easy to solve but collectively they could have destroyed the entire organisation.  What Colobus does is to help build a route-map starting from the existing situation and progressing to a place where the problems are behind you.  We do this in full cooperation with you and by cooperating and negotiating with the key parties, in this case powerful creditors like a bank and HMRC.