It was a simple transition from a small finance department into a more professional and experienced one. Or so I was told.
The reality was quite different. There was not enough money to pay employees, national insurance, VAT and taxes the following month.
The accounting was not updated and the financial statements were not reflecting the real activity. Customers were returning the invoices as they were wrong. DSO (Days Sales Outstanding) was many months (up to a year) and growing.
Adding to all this, the company did not have many suppliers to negotiate payments. It was a company providing professional IT services, so it was mainly made of staff.
After realising about all this, I decided to find out the real root cause of all these troubles, that meant, understanding why customers returned the invoices.
Finding out the real and final why was key to start handling the situation and working out a solution. This solution was a long term one, in the meantime, there was some urgent payments to make (wages, national insurance, taxes,…).
Being a knowledgeable expert in taxes helped me to apply for a special tax situation that allowed me to delay national insurance and VAT payments for two months, giving some breathing time.
I also took the top five customers (renown companies) and personally ensured the last invoice was correct (even if this meant manually issuing an invoice). This way I asked the bank for factoring.
This way I managed the short term urgent cash needs whilst I was implementing a long term solution to: ensure all invoices were always right, accounting was up to date on a regular basis and DSO was one to two months only.
It seems simple, easy and smooth after reading this article but it was all the opposite. Initially, I was hesitating to take on the role. When the reality was found out, the task was huge. Senior management was very nervous as to whether we were going to be able to cope with the whole situation.
With hindsight, I am glad I took on the challenge. I learnt a lot and now I enjoy taking on challenges.
Needless to say that I took some time off after everything was over!