case studies from our part-time management accountants

CASE STUDY:
PRICE REDUCTION PRESSURE

The problem...

The client’s main customer was applying pressure for a second price reduction in six months. The price reduction would have seriously risked driving the client out of business. The client needed help in understanding the extent to which he could reduce prices and the areas in which he could make cost savings.

The solution...

After listening to the MD’s description of his business and what he believed to be its strengths and weaknesses, time was spent with the Business Manager looking at the client’s data. Through a detailed analysis of the activities, costs and income, the key relationships and drivers were established. This enabled current break-even volumes to be calculated and enabled the creation of a financial model to consider a number of different and imaginative scenarios. Throughout the process, key personnel from the business were involved and it was eventually agreed with the MD what would be the “worst case”, “ideal case” and “acceptable case” scenarios for presentation in formal negotiations. The negotiations took place at the client’s premises. The MD gave a passionate presentation about his business. Detailed financial options were presented in a clear way whilst maintaining the confidentiality of the most sensitive aspects of the client’s commercial information.

The result...

The customer did not insist on an additional price discount and went further by offering to return to the prices of six months’ earlier. The MD and his staff were delighted with the result.

CASE STUDY: IMPROVING PROFITABILITY

The problem...

Prior to working for the client, new terms of trade with distributors had been negotiated designed to increase gross margin. Unfortunately after several months it became apparent that this was not the case and actual margins were falling.

The solution...

A full review of all distributor accounts was undertaken and the trading terms re-evaluated. It became apparent that the new terms would actually result in significant losses being incurred by the company. A new strategy of dealing with distributors was devised and agreed by the Board of Directors. Working alongside the Operations Director the terms were re-negotiated with distributors on terms much more favourable to the company.

The result...

The increased margin previously anticipated was subsequently achieved and relationships with distributors and stakeholders were maintained.