This article was contributed by Doug Bailey, CPA, an experienced CEO, CFO, director and restructuring advisor with more than 25 years in finance and corporate leadership.
Part of xNorth’s broader turnaround and restructuring network, Doug brings first-hand experience leading businesses through recapitalizations, refinancings, formal restructuring and complex stakeholder situations. Here, he shares a practical perspective on what boards and executives should establish during the first 30 days in a stressed business.
In a stressed business, cash visibility and decision authority need immediate attention. Boards and private equity owners must also establish when they will choose another route if the preferred plan slips. The first month should produce an operating plan the business can fund, with decisions tied to the cash available.
As a CEO, director and refinancing advisor, I have had to connect operating performance, financing capacity and timing. Each affects which decisions remain available to the board.
Connect cash to the assets
Establish cash available today and a rolling 13-week forecast, reconciled to actual results at least weekly. Identify the first shortfall and test collection dates, supplier commitments and production assumptions with the operating team. Uncommitted financing belongs in a separate scenario. Deferred maintenance may protect this week's bank balance while reducing next month's output.
In energy, power and other businesses with substantial physical assets, assess each material asset's cash contribution and sustaining expenditure. Separate spending that preserves existing cash generation from investment intended to create growth. A profitable expansion may still be unaffordable if receipts arrive after funding runs out. Technical leaders must validate what can safely be deferred and what that means for output.
Test what the business can finance
Map maturities, security, covenants and restrictions on cash movement. Test weaker prices, lower volumes and delayed receipts. Assess the combined claims on future cash from debt, royalties and other obligations, including the spending needed to keep assets productive.
Distinguish a viable operation carrying too much debt from one whose current operating model consumes cash. The first may need different financing; the second also needs operating changes.
The operating plan establishes the funding requirement. Private credit underwriting tests whether lenders can finance it on terms the business can carry. Repayment timing and collateral value under stress constrain capacity. A funding gap calls for a change in the capital mix or operating plan before commitments are made.
Discuss the downside with lenders early. Put dates against approvals, diligence and documentation, and identify whose commitment remains outstanding. A proposal has practical value only if it can close before the cash is needed.
Give the executive authority to act
An interim CEO, CFO or chief restructuring officer needs defined decision rights, access to the operating team and a clear reporting relationship. Separate advisory responsibilities from executive authority. Assign actions to named owners and explain cash variances promptly to lenders and the board. Agree how responsibility will continue through a sale, wind-down or transfer to permanent leadership.
xNorth's Playbook sets objectives, decision rights and exit conditions, supported by a partner-led steering committee. That structure gives the executive a forum to escalate a missed milestone while keeping responsibility for execution clear.
Prepare the alternative before it is needed
At Razor Energy, I served as CEO from inception through recapitalization, formal restructuring and the court-approved sale to Texcal. The question I would put to any board in that position is what happens if the next operating or financing milestone is missed, and whether there will still be enough cash to pursue another route.
With counsel and restructuring advisors, assess refinancing, asset sales and operational restructuring. Determine whether a proposal under the Bankruptcy and Insolvency Act or a process under the Companies' Creditors Arrangement Act is available, and what receivership would mean for the business. Establish the cash, preparation and approvals needed for the relevant paths. Ask counsel to review unpaid statutory obligations and any director exposure before payment priorities or new commitments are set.
Set the decision date by working backward from the cash required to implement the alternative. Include operating costs during the process, professional fees and realistic execution time.
For illustration, eight weeks of net operating cash outflow at $400,000 a week plus $600,000 in professional fees requires $3.8 million at commencement, before contingency. The decision must also allow time and funding for preparation.
If the preferred plan slips, waiting for certainty can consume the money needed to pursue another route.
What the board should have by day 30
By day 30, the board should have:
- A cash forecast reconciled to actual receipts and payments, with variances explained.
- Asset cash contributions and sustaining expenditure validated by operations.
- Financing milestones, required consents and outstanding commitments.
- Named decision owners, reporting lines and escalation triggers.
- An alternative with preparation costs, funding needs and a decision date.
These controls should be operating before day 30 wherever liquidity demands it. The board can then decide whether to continue, change the plan or begin the alternative while it can still be funded.
About xNorth
xNorth helps owners, boards and CEOs navigate transformation and critical leadership transitions through executive interim management, fractional leadership, high-end advisory and accelerated search.
In turnaround and restructuring situations, we mobilize experienced leaders to stabilize operations, strengthen cash visibility and execute recovery plans alongside boards, lenders and restructuring advisors.
Based in Canada and serving clients across North America, xNorth is the Canadian partner of the Valtus Alliance™, an international executive interim management network operating across more than 30 countries. The alliance provides access to more than 60,000 executives and completes more than 1,000 assignments annually.
