Furniture Manufacturer Straining Under Rapid Growth

Interim financial management | interim CFO, internal review team and information systems advisory.

Furniture factory | 300-person factory in Shanghai for children’s furniture, selling domestically and for export.

5 months | May – September 2016, plus follow-up visits.

Furniture Manufacturer Straining Under Rapid Growth

Urgent need for upgrade of business processes to support continued growth and for upgrade of reporting standards for integration with international group of companies following company’s acquisition by a private equity fund.

Transition of the finance department culture from that of a traditional, passive in-house accounting department focused on tax administration and collections to that of a bona fide finance team participating in strategy, proactively performing essential control functions and keeping books to an international standard.


ECFO introduced discontinuous improvements in finance and IT teams, culminating in a full restatement of financials, a passing grade on a ‘Big 4’ audit, introduction of a comprehensive system of controls and a successful transfer of all processes to a permanent in-house CFO. Specific highlights of the engagement include:

  • Developed baseline financial reporting processes from scratch using easily-obtainable source data. Compiled and transferred SOPs to existing in-house team.
  • Organized and oversaw the company’s first ever blind inventory count, bringing RMB 23m of assets under finance department control using a custom-built multi-user database.
  • Established beginning balances, re-wrote the chart of accounts and restated 3-months of financial statements. The company passed a ‘Big 4’ audit (its first ever international audit) on the basis of the restated books.
  • Implemented first ever review of inventory ageing, identifying RMB 7m of slow-moving or dead inventory previously listed as active (nearly 1/3 of all stock by value). This allowed the company to halt new purchases, initiate sell-offs and identify problem areas, while adding momentum to new purchasing controls.
  • Introduced review processes which identified significant, chronic irregularities in purchasing, outsourcing and worker timesheets. Instituted preventative control measures including price checks, price increase notifications and material / labor needs assessments.
  • Collaborated with in-house team to develop a new standard costing methodology. Increased frequency and standardization of the costing review process. This exercise, along with a re-distribution of manufacturing overhead, revealed that existing estimated costs of over 1/3 of the fast-moving product lines were misstated by over 50%.
  • Carved out position of CFO and completed handover to permanent, in-house staff. Upgraded existing financial department manager into a control role and assistant manager into a department manager role.
  • Introduced use of a daily cash journal with full capture of all inflows and outflows, as well as weekly bank reconciliations and cash counts. Put an end to extensive use of off-book cash via personal bank accounts.
  • Introduced cash budgeting with reconciliation to the cash journal and benchmarking against the yearly budget.
  • Instituted use of inventory system data in the accounting books as a foundational information set, reinforcing controls and underpinning the introduction of comprehensive and verifiable information capture by the finance department. This, in turn, allowed the company to rein in unaccountable employees and departments, including an off-book assembly shop doing RMB 10m / year of business.