Reducing potential expenses through insights gained from Financial Modelling
Our client is considering investing in a large home appliances company in the SouthEast Asia region. They wanted to save cost and delegate resources effectively by deciding which specific parts of the business to focus on during a due diligence exercise.
Disclaimer
As the project is highly sensitive and confidential, our client has requested that all sensitive data and information be redacted.
Background
Our client is considering investing in a large home appliances company in the SouthEast Asia region. Before engaging a big 10 firm to begin their due diligence process, especially understanding the price tag that comes with their service, they wanted to save cost and delegate resources effectively by deciding which specific parts of the business to focus on during a due diligence exercise.
Business Problem
Inconsistencies were spotted during their initial review of the company’s finances by our client, for example, there was a high volume of credit sales and inventory.
The sustainability of the business therefore seems contentious, whether their finances are accurate and potential risks of adopting bad debts were questions that everyone had.
As our clients are experts in reviewing businesses only they do not have the capacity in conducting financial reviews, they have decided that a financial professional’s assistance in this matter is necessary.
Solution
We started off by laying out the finances of the company to be assessed, then highlighted areas of concerns, especially the high volume of credit sales which we have flagged out as a high level concern. We then laid out the debtor’s collection data and high volume of inventory.
After laying out all necessary information we searched for competitor’s data for the same period, then conducted an audit to analyse the financial ratios and compare them. This helps us get a clearer picture of any shortcomings that are out of the ordinary for practices in such businesses.
We then compiled our findings into a report that showcases our analyses on the differences between the company and its competitors along with our recommendations for our client to focus on during their due diligence exercise with larger financial planning & analysis companies.
Impact
We identified a very low inventory turnover rate, high credit sales rate, slow debt collection rate—which meant that customers are paying significant interests, and a few business risks associated with their particular business model as well.
The company’s bad debts were also highest amongst their competitors, therefore we highlighted that cash flow is a problem for this company especially when compared with competitors.
We managed to validate the assumptions our client had about the company in an objective manner along with our recommendations, allowing them to have clarity on decision-making in proceeding with their investment or areas of focus during a due diligence project which will save them costs.
Obtain new insights and gain more clarity on how to plan your business using financial insights like our happy clients.
Pave the way of your business with objective financial data paired with insights from current affairs.
We get it, you’re a business owner, we know you started this business with a purpose separate from managing finance operations. So we add extra care and attention to your dreams and goals when optimising and supporting your finance operations because we believe young businesses deserve the quality service of matured businesses.
We know that taking on many roles as a business owner is taxing, especially when it comes to working on everyday finance operations that you are not familiar with. As qualified chartered accountants and certified Xero advisors, we are engrossed with your financial processes.
With daily finance operations performing smoothly, you can focus on the favourite parts of your business.
Focus more on your business instead of financial management like our happy clients.
Pave the way of your business with objective financial data paired with insights from current affairs.
We get it, you’re a business owner, we know you started this business with a purpose separate from managing finance operations. So we add extra care and attention to your dreams and goals when optimising and supporting your finance operations because we believe young businesses deserve the quality service of matured businesses.
We know that taking on many roles as a business owner is taxing, especially when it comes to working on everyday finance operations that you are not familiar with. As qualified chartered accountants and certified Xero advisors, we are engrossed with your financial processes.
With daily finance operations performing smoothly, you can focus on the favourite parts of your business.
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