Case History: Fiscal Planning, Controls and Management

The Organization
Generic drug firm with a strong line of prescription type products and good basic facilities.

The Situation
Six month decline in profits, serious cash flow problems developing and resulting inability to gear up for added products.

The Approach
A careful analysis of the situation was made covering all aspects of fiscal controls, liquidity of assets and internal procedures. This initial assessment revealed that...

  • Combination of heavy R & D expenses, softening prices on certain products and accelerating interest rates created the problem
  • Existing management was not prepared to cope with the problem and did little to correct it
  • The situation had to be reversed quickly if the company was to avoid market share loss

An intensive fiscal management system was installed which included...

  • Rigid cash planning and control technique - Major changes in production scheduling for 50% reduction of throughput time
  • Highly disciplined control and reduction of expenditures
  • Arrangements to reduce outstanding trade creditors balances over an extended time period while maintaining current terms on new purchases

In approximately 120 days...

  • Cash flow positive and operations profitable
  • Overhead cost reduced permanently by 20%
  • Inventory turns improved significantly
  • Suppliers fully cooperative

Pace assisted in a sale of the business on very favorable terms in the following year.

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