The Challenge
A UK-based management consulting firm with 45 staff was reporting healthy EBITDA margins — 18% on £4.2M revenue — but was consistently running short on cash. The founders were funding operational gaps through personal loans and credit lines, convinced it was a timing issue. Their accountant had signed off the accounts. Their bank wasn't alarmed.
But by the time they engaged us, the pattern had repeated for six consecutive quarters. They needed someone to look harder.
Our Process
We began not with the financials, but with the operational data — timesheets, project codes, billing records, and client contract terms. The P&L was clean. The problem was upstream of it.
Utilisation analysis. We mapped every consultant hour against billed and billable time. The firm was billing at 68% utilisation on average — but that average was masking a bimodal distribution: senior staff at 85% billable, junior staff at 44%. The junior cohort was the fastest growing part of the team.
Revenue recognition review. We found that the firm was recognising revenue on project completion rather than on milestone delivery — which meant large projects were generating cash inflows 60–90 days later than the P&L implied. The firm looked profitable on paper for months before the cash arrived.
Client terms analysis. Three of the firm's top five clients had 60-day payment terms, while the firm's own supplier and payroll obligations were on 30-day cycles. The structural mismatch was creating a permanent working capital gap that grew as the firm grew.
Project-level P&L build. We built a project-level profitability model that allocated overhead, travel, and support costs to individual engagements. This revealed two client relationships that were consuming 22% of total resource but contributing only 6% of gross profit.
Key Outcome
The root cause wasn't a single leak — it was three overlapping problems that together created a cash squeeze no single metric could capture. The firm's accountant had been looking at aggregate profitability; we looked at the machinery underneath it.
The most actionable fix was also the simplest: renegotiating milestone billing on three active contracts moved £190K of revenue recognition 45 days earlier, resolving the immediate cash pressure within one billing cycle.
Results
- ·£380K in annual cash leakage identified across working capital mismatches, utilisation gaps, and underpriced client relationships
- ·Cash position stabilised within 60 days of engagement start, ending six quarters of founder-funded gaps
- ·Two low-margin client relationships restructured or exited, improving gross margin from 52% to 61%
- ·Junior utilisation improved from 44% to 67% through restructured project staffing templates
- ·Monthly FP&A dashboard implemented: partners now review project-level P&L weekly rather than waiting for quarterly management accounts