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Performance Improvement for a Malaysia Healthy Drink Brand Owner that facing high sales growth but declining margins.

Performance Improvement for a Malaysia Healthy Drink Brand Owner that facing high sales growth but declining margins.

Situation:

A Bumiputra – owned company, manufacturing (OEM) and distribution of its own brand of a health drink that includes an exclusive blend of the mangosteen, with a secret formulation of non-traditional ingredients such as herbs, vitamins, minerals, amino acids, additional raw fruit or vegetable ingredients and other body-beneficial fruits, was experiencing high sales growth but declining margins and increased working capital consumption. They were in breach of covenants with their existing suppliers and had fully utilized their banking facilities.

Challenge:

Management reporting inadequate and untimely
Margin erosion and increasing overhead due to operational inefficiencies in order processing
Existing technology and processes not meeting changed business needs
Increased customer complaint due to long delays in dispatch of products
Stock not being managed including poor credit terms and inbound/outbound cost control
Creditability with financiers and creditors very low
Shortage of required skill-sets to run a high volume customer facing business.

Solution:

Implemented rolling monthly and yearly cash flow forecast and 3 way forecast model
Interim Finance Manager appointed to stabilize the cash flow and financial reporting of the business
Customer delivery issues addressed through sales and stock forecasts, improved dispatch efficiencies
Stakeholder management strategy to regain support of creditors including a payment plan
Sales mix and margins agreed to increase profitability cash flow
Technology improvements to meet business needs and enhancement of social media marketing.
HR plan put in place to bring the required skill sets into the business and implement tighter management processes to deliver operational efficiencies
Banker fully briefed on issues and actions being taken
Business model reviewed and overhead cost reductions identified.

Result:

Ongoing support from existing bbanks and financial Institutions and increase its credit limits.
Stakeholders including creditors and suppliers were carefully managed and remained supportive
Profitability of various marketing campaigns understood and return to margin management
Operational efficiencies lead to cost savings and improved customer experience
Improvement to working capital and cashflow management
Now consider exporting its products to neighbouring countries