Success Stories

Corrugated board and box company:

Three manufacturing locations, five distribution centers, initially $40 million annual sales, and 300+ employees. The company's audit revealed a loss of ($500,000) instead of the expected $500,000 profit. Many customer shipments were delayed despite having advance orders, and there were high unit costs and numerous delinquent accounts receivable. The company also had high levels of inventory, even with delayed shipments.

To address these issues, we took several steps. We brought their accounting practices in line with GAAP standards, implemented a new accounting system (Dynamics GP), and identified areas for improvement. Production scheduling and flow were significant problems due to constraints imposed by previous "Lean" consultants and challenges with personnel and collection processes.

After making procedural and personnel changes, we reduced inventories by 20% and decreased accounts receivable days outstanding by 20 days, resulting in a $450,000 increase in cash flow. We also achieved a 20% increase in plant throughput without capital expenditures. Within eight months, we were able to turn the initial ($500,000) loss into a $1,200,000 profit. Additionally, we saved $120,000 through renegotiating borrowing rates. Within two years, sales increased to $70 million, and the company acquired other companies.

Dry Food Manufacturing:

A company with $10 million in annual sales had been unprofitable for the first five years of its existence and was not meeting its bank covenants. Its accounting functions did not include cost accounting or actionable key performance indicators, and the gross margin was too low. The inventory was disorganized and lacked functional location indicators.

To turn things around, we developed a strategic plan and presented it to the lenders to negotiate concessions on the covenants. Several operational improvements were made, including streamlining purchasing and reducing the number of raw material SKUs. The customer quote process was automated, and labor costs were reduced by eliminating unnecessary temporary employees. Production efficiency was increased by strengthening maintenance operations, and the focus was shifted to waste reduction over production speed. The warehouse inventory was also reorganized, and a rack system and location identifiers were implemented. Finally, insurance costs were rationalized.

These efforts resulted in an increased EBITDA of $750,000, marking the company's first profits. The company also met its bank covenants and secured a 40% increased line of credit.

Meat processing company:

The company is a family-owned business generating $40 million in revenue. The father, who was the owner, wanted to improve the company before retiring and passing it on to his son.

A comprehensive operational and financial audit was conducted. It was found that there were issues with employee theft, including inventory theft and accounts receivable theft (check lapping fraud) carried out by a long-term employee, amounting to approximately $400,000.

A cost accounting system was implemented to address customer and product management issues. This allowed for the rationalization of customer and product SKUs. Many small customers with specialty brands of the company's standard products were causing production and inventory management complications. These small customers also had lower prices than larger customers, such as Winn Dixie and Disney World, and were creating additional administrative hassle by asking for credits and complaining frequently. The company also incurred expenses for family and friends, including cell phones, cars, and insurance for extended family members and former employees, which posed a liability risk.

The product SKUs were rationalized to address these issues, and small-volume, low-margin specialty brands were converted to standard brands. Pricing was adjusted, and special discounts and credits were eliminated. Moreover, expenses for family and friends were cut back for former employees and certain family members. Lines of credit were renegotiated and expanded, reducing costs and providing working capital.

As a result of these changes, the EBITDA increased by $400,000 annually. The father could retire happily, passing the business to his son.

Distillery:

There were significant challenges with operational and financial management turnover at a family-owned distillery with annual sales of $3 million. The distillery struggled with undefined processes across its operations and finance departments, and its accounting functions lacked cost and GAAP accounting. Additionally, the distillery was dealing with excess production capacity.

To address these issues, we took several steps. We developed and implemented comprehensive procedures for quality, production, purchasing, housekeeping, and inventory management, which resulted in a substantial $835,000 increase in gross margin. We restructured the general ledger, introduced a cost accounting system, implemented a production reporting system, and set up an excise tax tracking and reporting system, saving the distillery $80,000 in annual consultant fees.

Following the implementation of cost accounting, we conducted detailed analyses of costs, sales prices, and marketing strategies, which led to the successful implementation of price reductions. This move resulted in a remarkable 60% growth in volume within the premium product portfolio. Additionally, we ventured into a contract bottling business, successfully negotiated contracts, and achieved impressive sales of $1.2 million.

Family Restaurant Group:

Seven family-owned restaurants faced challenges with consistent underperformance and lack of profitability at two establishments. To address this, we developed key performance indicators ($Cost/100 customers) to evaluate input costs related to ingredients such as protein, labor, and fixed overhead. After a thorough analysis, we discovered that unfavorable management practices at both restaurants were the primary contributors to the issues, compounded by the sensitive nature of familial relationships within the management structure.

Upon closer investigation, it became clear that cost irregularities significantly affected profitability. For instance, employees at these establishments were allowed to make late-night batches of fried chicken and then take unsold fried chicken home during late evenings, leading to avoidable waste. Additionally, inefficient procurement practices, such as purchasing sugar in costly five lb. bags instead of more economical 50 lb. sacks, were identified as additional factors exacerbating the problem. We also found that total customer volume was low about the higher rent expenses. To address this, we re-negotiated the rent. We increased local advertising and specials to boost customer volumes and profitably increased to acceptable levels due to the changes implemented.