How We Improved Our CPG Client’s Cash Flow by 12% Without Increasing Revenue
In the bustling consumer packaged goods (CPG) market of Denver, staying ahead means not just chasing new revenue streams but optimizing what you already have. Our recent success story demonstrates the power of strategic planning and execution, alongside meticulous cash flow optimization, in transforming a local CPG company’s financial landscape without the need to boost sales. Here’s how we did it.
Assessing the Organization’s Goals and Operations
The journey began with a comprehensive assessment of our client’s goals and current operations. This critical first step allowed us to establish a clear benchmark and highlight opportunities for improvement. It provided a roadmap, outlining actionable steps to reach their financial objectives more efficiently and swiftly.
Implementing the Roadmap with Strategic Initiatives
Armed with a detailed roadmap, we focused on initiatives that promised the lowest effort, shortest lead time, and largest return on investment. Our approach was methodical, targeting areas where cash flow could be significantly improved without necessitating an increase in revenue.
Optimizing Working Capital
Our first move was to optimize working capital by leveraging vendor payment terms and capturing earnings on idle cash. This approach not only streamlined our client’s cash management processes but also unlocked additional liquidity, improving their cash flow by 5.7%. This initiative demonstrated the often-overlooked potential of working capital optimization as a powerful tool for financial health.
Capturing Rebates with Spend Management Platforms
Next, we tapped into the potential of spend management platforms to capture rebates and leverage purchasing power. By engaging with partner perks programs, our client benefited from extra signup bonuses and increased cash-back rebates. Furthermore, we ensured transparency and integrity by passing along referral fees received from partners, contributing an additional 1.2% improvement to the cash flow. This strategy underscored the value of smart spend management in boosting financial efficiency.
Savings on Key Vendors or Suppliers
The most significant impact came from addressing our client’s merchant processing fees. Initially burdened with fees of 4.17% of sales, we utilized our network of partners to renegotiate terms, resulting in a 31% savings on these fees. This adjustment alone enhanced the total cash flow by 5.1%, illustrating the critical role of scrutinizing and optimizing vendor contracts in financial management.
Beyond the Roadmap: Partnership for Ongoing Success
With the roadmap executed and cash savings secured, our fractional CFOs didn’t stop there. We continued to partner with our client, focusing on value enhancement, risk management, and providing ongoing leadership and advisory support. This holistic approach ensures not just short-term gains but long-term financial health and growth.
A Testament to Strategic Financial Management
This case study serves as a testament to the impact of strategic financial management on a company’s bottom line. By assessing the organization’s current state, prioritizing initiatives by their potential impact, and executing with precision, we helped our CPG client improve their cash flow by 12% and enterprise value by $1.1m without increasing revenue. This success story highlights the value of our fractional CFO services as not just a financial overseer, but as a strategic partner capable of driving significant improvements in financial performance. For businesses in Denver and beyond, embracing such strategic financial practices can unlock new levels of efficiency and profitability, setting a new standard for success in the competitive business landscape.
