Informal Turnaround Management
This represents an 18-month programme that works as follows:
Month 1 to 5:
- We become part of the existing management team of the company
- Our company and partners substitute existing essential services currently utilized by your business at the same rates or, in most instances, at reduced rates creating a monthly saving of between 10% and 20% per month over 18-months
- We prepare a proposal for the creditors of the business to enter into a compromise agreement with your business for repayment over a 12-month period which we have endorsed by the Court and which is binding on all parties
- We apply on your behalf for refinancing of your existing liabilities and working capital over the 12-month period or longer, if required. This can also entail venture capital in exchange for equity depending on the circumstances
Month 6 to 18:
- We manage the financial department of your business and ensure that payments towards creditors and financiers are met
- We provide you with by-weekly cashflow and financial reports
- We ensure that your business remains statutory compliant and that its accreditations remain intact to ensure continued business
- We ensure that debtors are collected and that legal proceedings are instituted where debtors default on payment terms
how it works:
Example only
Smart Construction (Pty) Ltd has 24 employees and during the past 12 months generated revenue in the amount of approximately R24 000 000 with an average turnover of R2 000 000 per month. The company had an overdraft facility with Unnamed Bank of R1 000 000 and Vehicle Asset Finance of R780 000. Trade Creditors outside 60-day terms were standing at approx. R3 000 000.
Smart Construction (Pty) Ltd had the following overheads that were substituted by CBH:
- The financial department of the company comprised of a Debtors clerk, a Creditors clerk and a Financial Manager. The salaries for these three employees amounted to approximately R55 000 per month
- Excellent Accountants assisted with the drafting of financial statements, Vat and PAYE submissions at a further cost of approximately R6500 per month
- The Short-Term Insurance Premiums for the company amounted to approximately R25 000 per month
- Internet @ approx. R2000 p/m
- Telephone & PABX @ approx. R4500 p/m
- Printer Rental & Maintenance @ approx. R8500 p/m
- Ace Attorneys @ approx. R5000 per month
This essential expenditure of the company amounted to approximately R106 500 per month which in turn equated to approximately 5.3% of the monthly revenue of the company.
In the first 60 days after Smart Construction entered our programme the following transformation occurred:
- Two of the three employees in the financial department were retrenched and only one debtor & creditors clerk was retained. TRC substituted the services of the other two employees and all banking services were incorporated into TRC. This created a saving of R5 000 p/m
- Outsourced Accounting was substituted that created a saving of R1500 p/m
- With the reputation and relationship of TRC, the company managed to obtain alternative Short-Term Insurance with similar cover at a 25% discount and therefore a saving of R6500 p/m
- On the internet, telephone & printer services, the Company, through implementing new technology was able to save approximately 20% on the monthly premiums
- Legal expenses were also reduced by approx. R1000 p/m
Within a further 60 days, TRC raised finance for the company to substitute Unnamed Bank at a similar rate and was further working capital raised in the amount of R1 000 000 to assist the company with its cashflow. An agreement with Trade creditors was reached at a compromise to be paid over 12 months in a single monthly instalment with interest over the period thus creating substantially better cashflow for the company.
The cost associated with the programme is set at a monthly fee equal to 2.5% of the monthly revenue of the company payable over an 18-month period. If you have regard to the monthly savings created on overhead expenditure the cost is mostly absorbed and will not affect the cashflow of the company.