The Diary of the Secret Interim, Day 21: It’s been a busy start – but I managed to improve the company’s EBITDA by 14% in my first week.

How does life as an interim differ from the permanent world? Three weeks into his new role and new life, our man on an initial six-month assignment as a Divisional CFO tells Eton Bridge Partners how it’s going so far:

Please note: This is ‘The Secret Interim’s Diary, Part 2’. Click here to read Part 1

Day Twenty-One

I knew from the start there would be absolutely tons of things to do in my new role and it’s become very clear I’m in what you might call a target-rich environment.

As I mentioned in my first entry, the company I’ve joined is in a state of flux and growth. Everything is new and I’m dealing with infrastructure: people, processes and systems. This facilitates some of the fantastic things a finance department can then do – collect cash from customers, pay our vendors, create statutory accounts, calculate and submit tax returns, create management accounts, and provide insights and challenge across the business to ensure every decision is smart and financially beneficial.

All those areas are being addressed and there’s a lot of energy being put into it. We’re wrestling with multiple ERP systems at the moment and are about to implement one common ERP system across the business.

When it comes to things like financial reporting, management reporting, compliance and tax returns; none of them will work unless you’ve got the right infrastructure in place. I can tell you now that I spotted something significant on my first morning in the job but I waited until the end of the first week to say something…

I saw a way of improving the company’s EBITDA by 14 per cent a year.

The area in question was early settlement discounts. These are a legacy from the days of high interest rates when, if people settled their accounts early, you gave them a sweetener – especially if a company is struggling with cash flow.

Here we are in an era of low interest rates, yet I worked out the company was giving away millions of pounds a year in discounts to customers who paid up within 75 days (which, you may say, doesn’t even sound that early!).

I’d restricted the procedure at previous companies and it was clear it would make a big saving here as well. The slight issue was that there may have been pushback from the sales team, who are keen to protect their good relationship with customers so, I had to approach it delicately.

Customers tend to fall into three categories when they are faced with a new restriction like this:

1 – Most, more than half, frankly don’t even notice.

2 – Another group say: “Yes, fair enough, it was nice while it lasted but we’ve been expecting this… carry on.”

3 – Some kick and scream and you need to decide where the balance of power lies. If it’s a strategic customer and you don’t want to upset them, you give them a year to wean themselves off the arrangement.

In the end, this will probably save the company millions of pounds a year. Suddenly, I wish that instead of a flat day rate I’d asked for a percentage commission. I could really do something with 10% of £2m in perpetuity!

Another area I’ve been looking at is customer rebates. You can have a situation where a customer makes one more single purchase worth a pound, and it triggers a retrospective rebate of hundreds of thousands of pounds. It’s a good thing to have different thresholds in place to encourage customers to go that little bit further with our products, but I’m looking at moving to a non-retrospective, increasing percentage model, so there aren’t any sudden surprises.

One difference I’ve found since moving from the permanent world to an interim assignment is that before, I used to have monthly catch-ups with my direct reports, that doesn’t feel frequent enough. Now I have weekly meetings with all of them to assess progress and recalibrate their focus. What did they do last week? What’s planned for this week?

I have to say; the team has reacted to that really well and there’s a great sense of urgency and focus. Everyone understands that there is so much to achieve and as a result, they are all more focused.

As I said in my first entry, the fact there is a lot of change going on is one of the things that attracted me to this assignment.

I’ll be back with an update in a couple of months when I will be half way through my six-month initial term.

To be continued…