Category: Blog

Is your company witnessing a financial dip due to its underperformance? Is your business approach not fitting with the new trends in the industry? Then it’s high time that you should think about restructuring your businesses. The main goal of restructuring is to build new business strategies, adopt the latest business trends that improve the overall operations of your business. As there is an ongoing pandemic since last year, the business dynamics have changed a lot. Due to which some businesses are facing loss/closure. So, it is highly important to make a change in your plan and adopt the new work culture for your business.

Ways to restructure your business

Scrutinize your business completely and see what is happening, where things are going wrong. Analyzing the financial statements of your business will give you a clear understanding of your financial declines. With this assessment, you can refine your financial plan or build a new one. While restructuring you can consider changing your business model to include new technologies or systems. You can add new sales strategies and executions that may work in your favor. If you have not hired any professional help for the areas you lack in previously, you should consider hiring professionals to avoid any mistakes or errors in the financial system.

If you wish to expand your business then you need to build new relationships, for this, you can use CRM platforms and attract new leads for your business. It is necessary to keep a close check on your sales execution and make adjustments to improve it further. Another important thing that should be fixed when restructuring is removing any complexities due to which your business was moving towards failure. You must adopt a simple and clear approach which streamlines your business operations without any complexities involved.

By taking all these steps of restructuring, your business operations will be more efficient with increased profits and scalability. Waiting too long for restructuring can only increase risks for your business and reduce options for improvement. Take timely action to avoid business failure or any other drastic actions that can have a major impact on your business.

With the unprecedented crisis that came with Covid-19 last year, many business owners were involve in the process of valuation of their business and thinking of selling, establishing partnership agreements, or litigation matters. For this purpose, the requirement is a business valuation report. But what exactly is a business valuation report? It is a process of calculating your profits, evaluating a company’s worth, providing a detailed description and functioning of your company, and most importantly providing all legal evidence to support your report. Individuals who have an interest in acquiring your business will first assess your business valuation reports and then consider if it’s worth buying or having a partnership with.

To make a good business valuation report business owners need to opt for the right approach to highlight important factors in the report. Making a good business valuation report is often an intimidating task for many business owners, therefore, an accounting firm, broker, or investment banker is hired to take over this job. Here are some important elements that are important to include in the valuation report:

Elements of Business Valuation Report

1. Assignment identification:

This is the first step which involves all the basics about your company. This includes your company’s name, size, shares, effective date, fair value. Also, mention the purpose of the report in this section such as buy/sell, partnership agreements, financing, or litigation.

2. Business Description

A valuation specialist should carefully articulate all the understandings that he has made of the business. The nature of the company and working operations must be discussed in detail. Analysis of a company’s strengths, weaknesses, risks, and further opportunities should be provided. A valuation specialist must ensure the authenticity of the facts that he is presenting about the company. If at any point he fails to do it then the report will not be considered fair.

3. Financial Analysis:

This is an essential element of the report which will provide all the details about the company’s previous financial performance, whether it had a successful financial strategy or a poor financial plan. This section will give you deep insights into the company’s finances, future strategies, and expectations.

4. Industry trends:

New trends in the market might influence the internal aspects of the business such as cash flows, potential risks which ultimately impact a company’s worth in the market. This analysis will provide information about where your company stands in the industry along with other companies of similar nature.

Business valuation reports are imperative for both business owners and buyers in the identification of a company’s true value. But, making these reports can be time-consuming. Also, it will depend on the size of the company and the complexities involved in it. Usually, valuation experts take a longer time to scrutinize all information and report facts. The goal should be to present an authentic business valuation report of the company which will be beneficial for both owner and potential buyer.

Managing your finances accurately in the foundation years of your business journey is very crucial. Initially, small businesses will find it complex to handle their accounts and finances. As a result, they end up making plenty of mistakes. Therefore, planning and strategizing your finances from the start is important to achieve success.

Business owners must adopt a successful accounting and financial framework which resonates with their business and personalize it accordingly. Low maintained financial records, unprofessional accounting strategies, and unstructured bookkeeping will result in business failure. It is crucial to take proactive measures and save your business from falling apart.

Here are few tips that can help small businesses for making accounting and financial strategies:

1. Separate Business Account:

Mixing your personal expenditure with your business transactions is one of the biggest mistakes that small business owners make. No matter how small or big your business setup is, the first rule is to have a separate account for your business. This will help your business transactions sorted and accurate. Furthermore, it can save your valuable time in record keeping.

2. Hiring Accounting Professional:

Small business owners usually look for a cheaper route and avoid taking help from an accounting professional. This is why their accounting and financial strategies fail at some point because of a lack of information and the use of incorrect tools. Hiring professional help might be a little expensive for small business owners but it can streamline business operations. Moreover, it will help you focus better on the growth of your business while your finances are handled by a professional.

3. Use cloud accounting software:

Technology has made accounting much fast and easier. With cloud accounting software, accountants can store all data on cloud software and access it remotely from anywhere using the internet. This software can also keep your financial data up-to-date without the hassle of maintaining each record manually. Automatic updating of financial records will minimize the risk of errors and ensure accuracy.

4. Track Business Transactions

Tracking business transactions become stressful for small businesses sometimes. But with the right tools, the process can be much easier. It is important to keep a record of every small invoice which can be required in the future. You can also make digital invoices for which many applications are available. Tracking your business transaction will help you analyze your expenses and your business profits. Business transactions must be transparent, error-free and accurate but if there are any errors then you should immediately take necessary measures to fix the issue.

5. Backup of Financial records

Increased use of technology has its benefits but it also comes with few risks. Your data can be hacked or manipulated which can be very harmful to your business. Therefore, it is necessary to have backups of data in the different cloud accounting software as well as manual records so in case your data gets damaged you will have the backup of your accounting data.

6. Regular Financial reporting to track business performance

Monitoring of your financial reports should be done regularly to track your business performance. Financial statements can highlight whether you are performing well or there are still some weaknesses in your financial modules. Analyzing financial statements can also detect any errors which are affecting your business performance. It is vital to keep a close check on your business performance that will help you ensure that you are heading in the right direction in achieving your business goals or you need to redefine your goals to stimulate growth.

7. Know-how of applicable tax and regulations

While starting a business, small business owners need to know the basics of tax regulations. They need to be aware of the tax filing, rules, deadlines, and penalties information implemented by the Tax authority on businesses. Small business owners are not aware of tax guidelines which can become a problem for them if they do not seek any assistance or get the required tax knowledge timely. All businesses must comply with the regulations and file their taxes correctly in the specified period.

Amidst the historic economic recession caused by the coronavirus pandemic, many businesses went through the major financial crisis. Finance leaders and professionals were left with no other option but to consider cost-cutting. Companies facing financial downturns started taking the approach of cost-cutting without going through proper financial analysis. Such pressured cost-cutting may be a common choice by the businesses but it is not always the best solution to tackle financial problems.

Quick wins VS Long term strategy

Many businesses want to have a quick win instead of making long term strategies and plans. They look for changes and improvements in their current strategies which require minimal effort and at the same time adds value to their business.

Businesses can think of reducing their discretionary expenses which will not affect their business operations. Spending on non-essentials and non-critical projects can be put on hold as cost-cutting on this will have less risks. Another immediate action can be deferring the recruitment process, negotiating new terms with your clients and assessing your underperforming assets. Businesses should consider options that are relevant and easier for them to do and have minimum risks involved.

Cost cutting: Weigh the Risks

One of the most common corporate reactions in the Covid-19 recession was reducing their staff. Staff cost cutting can save your training costs and salaries. But in the long term this can be harmful as you lose your skilled employees. Companies who are honest to their staff about the financial health of the company and plan to put a short-term cut to the salaries which will be restored once the finances are back on track, staff also willingly cooperate in such scenarios.

However, finance leaders should avoid acting hastily and make decisions under pressure. Business owners should consider alternatives that do not affect their business operations. Finance leaders should look out for measures that reduce expenditure, weighing the potential risks and then take action accordingly.

Cutting marketing cost is another short-term cost saving plan but on a longer run it can affect your company’s presence in the market which can be more damaging. Maintaining your marketing efforts in the time of recession can definitely give an edge over your competitors. Keeping a good marketing game requires maintaining it on a longer run but this is where more brands lack at. In tough times, brands instantly cut off their marketing costs even when some of them can afford, this is the biggest mistake they make. It will take them much longer to bounce back in the industry at a position where they were before. Whereas, their competitors can take full advantage by taking over their position.

Which is the right cost reduction approach?

Different cost management approaches can be adapted according to your business requirements but the first and foremost step is to conduct an in-depth analysis of your company’s financial performance. You should never opt for cost-cutting on the basis of someone else doing it. Some approaches are suitable for others but maybe not for your business.

Post the coronavirus pandemic, one of the major focuses of companies should be on risk management. There should be proper financial planning, emergency funds, strategies to cope up with such an uncertain crisis in future. Pandemic have changed a lot of dynamics in which the businesses think, they have become much more careful in taking actions, got a better understanding of their business position and how can they make their company survive in tough times.