A large car battery distributor in Australia encountered financial difficulties and engaged Australian Debt Solvers to resolve the situation. We were asked to provide advice on ways the business could improve and maintain its competitiveness, which ultimately led to a substantial increase in their profitability.
The first area we immediately identified was that a lot of stock was maintained in the company’s warehouse. This caused high holding costs and obsolete stock. We reviewed historical sales for the past three years and identified the slow moving stock, compared to stock that had a quick and high turnover. We then adjusted stock levels to our findings, resulting in a reduction in required floor space by 60%. We then identified a more suitable and cheaper warehouse which reduced rent significantly.
We also introduced the company to web sales – their website was totally revamped and also linked to e-bay with easy online payment options directly linked to the dispatch department. This resulted in increased sales and a more efficient ordering system.
In addition to the above, we identified the company had a large amount of debtors. We identified the opportunity in obtaining cash flow finance from the debtors, resulting in better cash flow. With the better cash flow, we were able to improve the trading terms with the key suppliers and obtain better pricing for the major stock the company purchased. There was a small cost in having to finance the debtors, but the cash flow improvement and discounts received from the suppliers clearly outweighed the cost.
Upon the above strategies being implemented, the profit margin for the company increased dramatically. This in turn provided a pricing opportunity allowing the company to lower its prices for a lot of its products, making the company extremely competitive in its space.