1. Situation Analysis
There are checklists of things to be considered, including:
- Balance sheet review including identification of “off balance sheet” commitments
- Detailed “as-is” cash flow projection to determine where the troughs are (a positive cash flow month can still have an out-of-cash day - usually on a payroll day)
- Detailed review of the reality of the accounts receivable aging
- Review of accounts payable and whether it is a complete picture
- Review of all other assets with a focus on inventory
- Identification of assets that can be monetized (the most obvious being real estate-owned, via a sale and leaseback)
- Review of bank lines
- Review of products for "cash cows" to be maximized, and cash users to be scaled back or eliminated
- Review of pricing policies with an eye to generating more immediate cash
- Review of the organizational structure and reporting lines
- Identification of pending and threatened litigation and regulatory matters
- Creditor communication must be open and candid
- Employees need to be kept informed
- Major customers, and major suppliers, may need to be communicated with and become active partners in the solution
- If it is a public company, discuss with corporate counsel about disclosure requirements
