Resolving a Critical Overdraft Situation
Introduction
A construction company within a larger group found itself in a severe financial crisis, struggling with an overdraft of £1.2 million. The company’s financial instability not only put its own future at risk but also threatened the stability of the entire group. Despite the Group Holding Company’s guarantee, the bank insisted on an additional guarantee from another financially strong entity within the group, highlighting the seriousness of the situation.
Without immediate intervention, the company risked defaulting on payments, further eroding trust with financial stakeholders and suppliers. Josef was brought in to diagnose the underlying issues, implement financial controls, and restore stability.
Situation
The company’s unsustainable overdraft created major cash flow pressures, limiting its ability to operate effectively. Its lack of structured financial controls, inefficient credit management, and unclear supplier agreements were exacerbating the issue. If the problem was not addressed swiftly, the company would remain reliant on external guarantees and struggle to maintain financial credibility.
Obstacles
- Poor customer service leading to delayed payments from clients.
- Weak credit control and daily ad-hoc payments, making cash flow unpredictable.
- Slow and inconsistent invoicing, creating revenue bottlenecks.
- Unstructured supplier agreements, leading to unpredictable payment schedules.
- A high-risk financial position requiring multiple guarantees to maintain banking facilities.
Action
Josef implemented a rigorous financial restructuring plan:
✔ Introduced structured customer service procedures to improve client relationships and ensure faster payment cycles.
✔ Implemented credit control measures, including daily cash flow monitoring, to track and manage receivables more effectively.
✔ Realigned departmental processes to ensure that on-site variations were identified, reported to clients promptly, and invoiced without delays.
✔ Stopped daily ad-hoc payments and introduced a weekly payment run, ensuring better control over cash outflows.
✔ Negotiated longer supplier payment terms, allowing for a more predictable and structured payment schedule.
✔ Implemented financial forecasting and treasury management, providing leadership with greater visibility and control over cash flow.
Result
✅ The £1.2 million overdraft was cleared within just two months.
✅ Guarantees from the Group Holding Company and other entities were no longer required.
✅ The company’s and group’s credit profile improved almost overnight, restoring confidence among financial stakeholders.
✅ The group’s primary lender took notice, offering more favourable terms for future facilities and streamlining the review process.
✅ For the board, this wasn’t just a financial win—it was a strategic turning point. One director commented:
“We’re no longer playing defence. We can finally start thinking more offensively about our future.”
✅ Most importantly, the company and its leadership regained a sense of control—not just over finances, but over the future of the business.
Conclusion
Josef’s intervention not only resolved an immediate financial crisis but also created a long-term framework for financial discipline and resilience. What began as a high-risk, unsustainable overdraft situation was transformed into a structured, cash-positive business model.
The impact extended beyond just eliminating debt—the company’s improved financial credibility restored confidence among lenders, suppliers, and internal stakeholders. With stronger credit control, supplier negotiations, and forecasting in place, the company was now equipped to prevent future financial instability rather than simply reacting to it.
This shift allowed the board to transition from crisis management to strategic planning, giving them the freedom to focus on growth, investment, and business development rather than just survival. Instead of firefighting financial emergencies, the company could now seize new opportunities with confidence, knowing it had the financial systems in place to sustain future expansion.
By addressing fundamental weaknesses in cash flow management, Josef ensured that the company no longer relied on external guarantees to stay afloat. It had successfully moved from a position of financial vulnerability to financial strength, proving that with the right financial discipline, even the most daunting overdraft crisis can be reversed.
