What Is Business Restructuring?
“What is business restructuring?” is a question that will surface from time to time. It will feature in the mass media, social networking sites, internet as also in the streets. All kinds of people will ask this question. They will range from a student, an executive, an entrepreneur, the layman amongst other people. The following points will help understand what it is and how it works in the Australian setting.
What It Is
Simply put, business restructuring is changing how a business operates with the intention of improving profitability and efficiency. Normally, the exercise is associated with struggling firms. These are businesses that have been in the “red” for long or have seen their profitability dipping over the years. It covers all the sectors of a company both financial and also personnel.
How It Works
There are several reasons that may lead to a business performing badly. During a restructuring, the concerned parties identify the positives and negatives. The factors that contribute to losses or increase expenditure are eliminated. This may entail letting go of employees, selling-off assets, downsizing the company, outsourcing some services and much more. More resources are diverted to areas that bring in the most revenue.
Notable areas of Concern
In any restructuring exercise, there are areas that will always play a key role in determining whether a business survives the onslaught. The following are the most distinct:
· Account Receivable: – It is prudent for the business to recover all the amounts owing. This is done through talking to debtors nicely. Also, working hand-in-hand with the accounts departments will also hasten the process.
· Account Payable: – The Company can also renegotiate its debts with financial institutions such as banks and also other creditors. Many of the lenders or financiers will always be willing to extend the repayment period. The extension allows the firm to focus on the activity at hand.
· Employee Motivation: – The restructuring period is always a trying time for the owners as well as employees. Seeing some of their colleagues leave will always demoralize the staff members. The people in charge need to motivate and encourage the employees left behind since their support will be needed the most at this time.
The above topics have clearly shed more light on what restructuring a business is all about. On paper, it may look like a term that any business owner, entrepreneur, employer or employee would rather avoid. However, if carried out judiciously while exercising due diligence, a struggling business will be able to get out of the woods.
If your business is struggling then before it’s too late you should get proper legal advice from an experienced commercial lawyer like Joe Gilles.
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