Rescuing a Swiss Machine Builder from the Brink: My Journey as Interim CFO

In the dynamic and unpredictable world of business, even the most seasoned and successful companies can find themselves facing existential threats. This was the situation I encountered when I was appointed as the Interim CFO of a Swiss-based medium-sized company, renowned for assembling high-tech, best-in-class production lines. The task was formidable, but it was also an unparalleled opportunity to guide a storied institution away from the precipice of insolvency and towards a stable and prosperous future.

The Perfect Storm: A Cascade of Challenges

The company I joined had a sterling reputation for excellence, with a business model centred on the assembly of complex production lines. These projects typically took between 7 to 11 months to complete, though timelines could extend significantly when unique technological developments were required. To finance these long-term projects, the company relied on milestone payments from customers, a strategic approach designed to minimize the working capital tied up in the assembly process.

For years, this model functioned seamlessly, and the company enjoyed a period of solvency and robust cash reserves. However, an unexpected crisis emerged, exposing vulnerabilities that had been lurking beneath the surface. The catalyst was the implementation of a new Enterprise Resource Planning (ERP) system. This system, intended to streamline operations and enhance efficiency, instead became the source of massive disruptions. The company's ability to manage day-to-day operations, particularly the complex assembly of production lines, was severely compromised. Delays in project deliveries ensued, leading to corresponding delays in milestone payments from customers.

Adding to the complexity, the company's growth strategy involved introducing new technologies as part of commercial projects rather than through separate R&D endeavours. While innovative, this approach further delayed project deliveries, exacerbating the cash flow issues. The slow erosion of cash was insidious, going largely unnoticed until the situation became critical. By the time I stepped in, the company was on the brink of insolvency, with bank accounts nearly depleted.

Turning the Tide: Strategic Crisis Management

Stepping into a crisis is never an easy task. However, crises also present unique opportunities to catalyse significant change. In times of extreme pressure, people are often forced to confront harsh realities, which can galvanize them into action. But willingness to act is only the first step. To address a crisis effectively, one must first understand its root causes, much like a doctor conducting thorough tests before prescribing treatment.

As the Interim CFO, my immediate priority was to gain a comprehensive understanding of the business. I rapidly onboarded, building relationships with both the top and middle leadership teams and delving deeply into the company's processes. Within two weeks, I developed a tailored cash flow forecasting model that accounted for the company's unique project-based business and its irregular cash inflows dependent on milestone payments.

This forecasting model, updated weekly and shared with the Leadership Team and the company's Private Equity owners, quickly revealed trouble spots. Like diagnosing an illness, we were able to pinpoint the exact issues affecting the company's financial health. Immediate actions were necessary to prevent insolvency. We accelerated the push for new sales orders at an unprecedented rate, delayed vendor payments, halted discretionary spending and investments, renegotiated our credit facility with the bank, and aggressively collected overdue receivables. Under my leadership, the entire organization was mobilized. Transparency was key — I communicated the dire situation honestly and set clear expectations for everyone to support the company's turnaround.

Beyond Diagnosis: Comprehensive Transformation

Diagnosing the issues and implementing immediate fixes improved the immediate situation, but it wasn't enough to prevent similar crises in the future. Much like how poor lifestyle choices can lead to severe health problems, the company's crisis highlighted deeper, systemic issues that needed addressing. To truly save the company and create substantial value for its private equity owners, who invested their hard-earned money with the expectation of gaining handsome returns, we needed to embark on a comprehensive transformation. This was not just about preventing another crisis but about putting the company on solid footing for long-term success.

We began by implementing a robust risk management framework around project delivery. This included standardizing and improving customer billing and collections processes to ensure projects required minimal working capital. We also focused on enhancing the quality of project delivery to shorten delivery cycles, which in turn would accelerate cash inflows. Streamlining the sales process to secure orders faster was another critical step.

Capacity planning and the rollout of the Sales, Inventory, and Operations Planning (SIOP) process became essential components of our strategy. We drove labour productivity and material cost reduction initiatives and reorganized the sales team to better align with our strategic goals. Recognizing the failure of the ERP system, we decided to reimplement it while simultaneously stabilizing the existing system to ensure continued functionality.

Improving people and talent management was another crucial area of focus, especially given the company's 30% attrition rate. We developed a comprehensive roadmap to address this issue, fostering a culture of engagement and retention. The appointment of a new CEO and the dismissal of the former CFO were necessary steps to realign the company's leadership with its new strategic direction.

In the aftermath of the crisis, a significant part of our transformation involved reengineering the Profit & Loss (P&L) statement to ensure that financial performance was transparent and understandable for everyone. At the core of this reengineering was the introduction of a cost centre structure, which allowed us to separate variable costs from fixed costs clearly but also drive financial accountability among company's individual departments . We also introduced an "unpolluted" gross margin metric that showed the true cost of sales against revenue, stripping out unrelated costs such as warranty expenses, material purchases, and new product development costs.

Furthermore, we implemented cost accounting with absorption metrics at the centre, introduced productivity calculations, and developed a company-wide balanced scorecard. This scorecard was linked to the key objectives of the company and ultimately its long-term strategy. These changes provided a clear and accurate picture of financial performance, enabling better decision-making and accountability across the organization.

Additionally, we drove individual accountability among employees, ensuring that everyone understood their role in the company's turnaround and long-term success. The crisis became a catalyst for transforming the company culture, fostering a sense of ownership and responsibility at all levels. This cultural shift was instrumental in maturing the organization, creating a more engaged, proactive, and resilient workforce committed to continuous improvement and shared success.

Lessons Learned: The Moral of the Story

This journey has reinforced several vital lessons. A series of small business mistakes, seemingly insignificant when considered in isolation, can collectively lead to a catastrophic outcome. Each error feeds into the next, creating a downward spiral that can rapidly escalate into a full-blown crisis. In our case, the failed ERP implementation was the tipping point, but the underlying issues had been building over time.

One of the most profound lessons is the importance of maintaining rigorous cash flow management. Regular, accurate cash flow forecasting can provide early warning signs of trouble, enabling proactive measures to prevent a crisis. Additionally, having a robust risk management framework is crucial, particularly for project-based businesses with complex, long-term engagements.

Transparency and clear communication are also essential. In times of crisis, it's vital to be honest about the situation and set clear expectations for everyone involved. This fosters a culture of accountability and collective effort, which is critical for successful turnaround efforts.

Moreover, the crisis highlighted the need for a comprehensive approach to business transformation. Quick fixes can address immediate issues, but sustainable success requires addressing the root causes. This involves re-evaluating and restructuring key business processes, improving operational efficiency, and fostering a culture of continuous improvement.

A Stronger Future: From Crisis to Resilience

A business crisis can either break a company or make it stronger. In our case, it made us stronger. The experience set us on a path of professionalization and future growth, ultimately increasing our value not just to shareholders, but to all stakeholders, including employees, customers, vendors, and the local community.

Reflecting on this journey, it's clear that maintaining rigorous cash flow management, establishing robust project delivery frameworks, and fostering a culture of transparency and accountability are essential best practices. The initiatives we launched in response to the crisis not only saved the company but also transformed it, laying the foundation for a resilient and prosperous future.

In conclusion, being hired as Interim CFO to save this company from insolvency was a challenging yet immensely rewarding experience. It reaffirmed my belief that with the right leadership, transparency, and decisive action, even the most dire situations can be turned around, leading to a stronger, more resilient organization. This journey has been a powerful reminder that in the face of adversity, there is always an opportunity for growth and transformation.

Cracks in the Foundation: A Final Thought

Whether you are Private Equity partner or associate or you are an executive leader reading this, it's crucial to understand that every company has its cracks. These vulnerabilities can unexpectedly widen, bringing a business to its knees. A savvy leader will spot these cracks early, and an even savvier leader will be relentless in strengthening their business, even when no signs of weakness are apparent. This is where an external check-up or perspective can provide immediate value. Just as regular visits to a doctor can improve a person's well-being and sometimes save their life, an external review can fortify a company's health and ensure its long-term success. I offer a free business health check to help identify and address these potential issues. You can find the link to this FREE service here .

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