How to Undertake a Financial Restructuring: Tips on Turning Your Company Around

how to undertake a financial restructuring

If you’re a business owner who is interested in creating the best possible financial environment for your company, then you’re probably wondering about how to undertake a financial restructuring that will make that a reality. Whether things are going well or not, you need to evaluate your situation so that you can come up with a clear, attainable plan as to how you’re going to be able to remain competitive. You want to reach a point where, despite economic conditions being what they are, you’ll be able to eventually grow and expand in the future.

Before you ask about how to undertake a financial restructuring, let’s get a quick look at common scenarios that warrant taking that path to see if this is your best option.

  • Does your company have excess personnel? – Many times, staff responsibilities can overlap to the point where teams, divisions, or departments are doing the same thing. In some cases, one of these can be repurposed for other tasks, or the department can be eliminated outright in order to reduce cost and consolidate workload.
  • Has Your Net Profit Been on the Decline? – There could be one big reason why this is happening or several smaller ones that are working together to hurt your company’s financial viability. Regardless of the cause, an expert financial consultant who initiates a financial restructuring can help eliminate these and put you back on the right path.
  • Has Your Company’s Offering Been Overshadowed? – When something new is introduced to the market and your company is unable to keep up, you may have to change the way you do business so that you can be competitive once again.

These are just a few scenarios that warrant restructuring your company’s operations and there are several things you can do to get back right on track.

How to Undertake a Financial Restructuring: Common Strategies

It’s important to remember that no two firms are exactly alike, so the advice provided here may have to be adjusted slightly to suit your company’s situation. That said, these strategies have proven to help companies across a diverse number of sectors time and again.

  • Work with New Leadership – More often than not, a restructuring brings in new management. Whether this is a new CEO, CFO, project manager or any other position, this person may have new ideas and insight that can help get the company get back on track. Listen to what they say and take their advice. It could lead you to great things.
  • Consult Outside Help – When it comes to figuring out how to undertake a financial restructuring, a fresh set of eyes can make all the difference. If you bring in an expert who has no bias toward your company, you may be made aware of issues that you never knew about before.
  • Practice Transparency – The worst thing that you can do when your company is rearranging its operations is to keep people in the dark. Everyone from your employees to your investors deserves to know exactly what’s being done to keep the company afloat and see to it that the doors stay open. Doing this doesn’t just make it so that there aren’t any surprises, but shows that you’re someone who can be trusted. People will be more likely to stay by your side during transitional periods.
  • Establish Your New Goals Early. Reiterate Them Often – In working through how to undertake a financial restructuring, you want to make sure that you never lose sight of the objective. Make it clear what the entire point behind your company’s restructuring is and, once you see what you want to do, pursue that vision as aggressively as you’re able to.

Regardless of the strategies that you use to turn your company around and make it profitable again, you’ll want to make sure that your practices are sustainable, so that you can try to avoid turbulent times in the future.

Remember, running a business successfully does not need to be complicated.  Keep it simple!

For more valuable articles to help you successfully manage the challenges of growing your business profitably, please search our blog at our website www.portalcfo.com.

How to Pay Employees: What You Need to Know About Pay Structures

employee pay structure - Portal CFO Consulting

employee pay structure - Portal CFO Consulting“How to Pay Employees?” This is a question that many who are new to owning their own business ask themselves.

And why not?

The people who work hard to make sure that your company succeeds deserve to be compensated for their time and effort, but it can often be difficult determining how pay is going to be distributed among your workforce. This is because there are a lot of different factors that you have to keep in mind.

When determining how much an employee should be compensated, you need to keep in mind qualities like:

  • Your location and what the average person in your area makes for the same kind of work
  • The condition of the job market
  • The employee’s background and experience
  • The industry standard

Beyond that, figuring out how to pay employees also involves how frequently they get paid, the method through which they get paid and how things like benefits and company perks will affect that employee’s pay.

Let’s take look at many of the other factors that you have to determine when it comes to employee pay and, hopefully, you’ll be able to conclude what the best practices for your own company are.

Ways to Pay Your Employee

When it comes to how you pay the people who work for you, the most important thing to remember is that you have three basic methods for determining how they will receive their income:

  • Commission – When an employee gets paid on commission, he or she receives pay based on what has been sold. A percentage of the goods that the employee sells will be given to them as their compensation, so if you want to determine how to pay employees so that they stay motivated and you keep key talent then commissioned pay might be right for you.

While this structure has advantages like unlimited earnings potential and some degree of freedom, you have to be aware of the fact that this pay structure can also lead your salespeople neglecting good customer service in favor of chasing the biggest possible sale.

A salesman who only receives commission may not take the customer’s needs into consideration, or they may choose which customers they aid based on who they think will lead to the biggest payday.

  • Hourly Wages – This is by far the most common method of payment in our society. With this structure, the employee is paid a regular rate that gets multiplied by the hours that they work over a pay period. If you’re looking for a method on how to pay employees that will produce work when you need it and keep you from paying an employee when business is slow, then this is the kind structure that you should use. You may also get employees who are willing to work at times when others aren’t, like holidays, because they may need the money.

Some Disadvantages to Consider

As a business owner, one disadvantage you face with hourly employees is that labor laws state that you have to pay overtime (the employee’s hourly rate plus half) for every hour over forty that they work. If you don’t limit how often those employees work, payroll can start to encroach on your margins.

  • Salary – Through this form of payment, the employee receives a set amount of money per year, distributed in the same amount every pay period. Salaried employees typically don’t receive things like overtime, but the tradeoff is that they have a bit more flexibility about when they work.

One disadvantage that you face as an employer is, if this is how you pay employees, your ability to offer compensation as a reward for additional work is limited because of the employee’s fixed income. Salaried pay may also offer little in the way of appreciation shown for the extra work that an employee does. This could potentially affect morale.

Which of these structures you use to compensate your employers can have a lot to do with what kind of business you run and the size of that business, among other things, but the structure of the pay isn’t the only consideration that you need to take into account when figuring out how to pay employees.

Other Considerations

Besides the structure, you also have to consider the method of delivery (traditional paper check or direct deposit) as well as the perks that you can afford to offer.

In addition to adequate pay, many employees and job seekers also look for benefits to make their lives easier.

Some benefits that many people typically look for in employment can consist of:

  • Insurance like health, dental, and vision
  • Adequate vacation time
  • Employer sponsored retirement plans where contributions are matched by the company
  • Flextime to work at least some hours at their convenience provided the quality of their work doesn’t suffer.

Remember, when thinking about how to pay employees, it usually goes beyond what you offer in the form of a paycheck.

Your employees want to feel like they’re valued and their contributions matter in the larger scheme of things. Beyond that, you can retain loyalty by offering benefits that ensure security and promote a healthy work/life balance.

Show your employees that they matter and you’ll get quality work out of them in return.

Remember, running a business successfully does not need to be complicated.  Keep it simple!

For more information on business analysis, business planning, and ways to grow your small business profitably, please check out our website www.portalcfo.com.  Follow us on Twitter @portalcfo

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Financial Spring Cleaning: Budgeting Tips for Businesses

Budgeting tips for business

As a business owner who wears many hats, you are faced with the difficult task of how to best allocate your time. There are a few budgeting tips for businesses that could help save your most valuable asset – your time. The last thing you need is to spend hours and hours in boring financial budgeting meetings when you should probably be out growing your Company’s sales.

Here are two simple and complementary budgeting tips for businesses to use to gather valuable insight into your Company’s financial position in just minutes.

Budgeting Tips For Businesses #1: Annual Profit and Loss Budget

The first budgeting tip for businesses is an annual profit and loss budget. Most accounting packages have this simple capability.  Do the best you can to forecast what your year will look like and be conservative.  Try not to forecast big jumps in sales unless there is a compelling reason to do so.

Add a 10% cushion to your budgeted operating expenses.  On a monthly basis, press a few buttons in your accounting package to produce a “Budget vs. Actual” report with percentages.  Now, you can quickly tell where you stand with respect to financial performance and easily see which expense accounts you need to focus on.

Budgeting Tips for Businesses #2: Cash Flow Forecast

The second and complementary budgeting tool for businesses is a cash flow forecast. If your accounting software has this capability, then use it.  If it does not, then create a simple Excel template.  On a weekly basis, you want to map out what you think your cash receipts will be minus the cash you will pay out. Feel free to map out as long a period of time as you like.  My preference is one year.  Now, you will know exactly when you might experience a cash shortfall.  In the event of a potential cash shortfall, the benefit to you is that you will know exactly when it would happen and have ample time to deal with it; instead of experiencing a “cash emergency.”

These two simple tools should take you no more than 30 minutes per week to review.  They will go a long way to reducing your stress level and remove any doubts from your mind about your Company’s financial position.

Remember, running a business successfully does not need to be complicated.  Keep it simple!

For more valuable articles to help you successfully manage the challenges of growing your business profitably, please search our blog at our website www.portalcfo.com.

Rationalize your business now before it is too late

Compensation PackageOne topic that is all over the news these days is state employee benefits.  I understand that compensation is a very challenging issue; with key constituents making powerful points on both sides of the argument.  The point, as I understand it, seems to be:  “what was agreed to” and “what can afford to be paid.”  I tried to think about the issue in basic terms and came up with a similar example that I see time and time again in my CFO consulting practice.  So, let’s look at the issue from a business owner’s perspective.

I asked one of my business owner clients how he arrived at the dollar amount of his monthly compensation package.  He replied to me that $X is the amount of money that he needs to live on.  Gently, I explained to him that based on his company’s current revenue and net income, his business could only afford to pay him $X MINUS $5,000 per month.  You can imagine how my response was received by this hard-charging entrepreneur.  I explained to him that he (and his business) was sitting on a ticking time bomb that was called “his pay.”

He had already weakened his company over the last year by taking more compensation out of his business than his business could afford to pay him.  The problem showed up in the form of a lower-than-usual cash balance, a higher line of credit balance, and a constant scramble to collect accounts receivable in order to make payroll.  In other words, the business was doing just fine (financially healthy and growing slowly), but it was beginning to struggle to pay its owner’s ever-increasing compensation demands.  I figured that I better press the argument before the company reached the point of no return; aka “ceasing to exist in the business world.”

I explained to the business owner that the growth in his compensation package had outpaced the growth in his business and therefore he was slowly killing his business and therefore his livelihood.  Any business, I explained, can only afford to pay its owner “so much”.  You have to decide if you can live on whatever that “so much” is or consider other alternatives.  You are a risk-taking entrepreneur.  You have to decide if you can grow the business to the point that it can afford to pay you the compensation that you desire and refrain from taking your ideal compensation out of the business before that time arrives.  If you believe that your business will never be able to provide the compensation that you desire, either deal with it or sell that business and go start another business that will provide you what you seek.  No one can answer that question but the business owner.

My client wasn’t having any of it.  He told me that he was accustomed to living a certain “lifestyle” and come hell or high water, he was going to live that lifestyle.  I explained to him that he needed to reduce his pay or else he would go out of business. There was no other way around it.  He is choosing not to do it.  He believes that he will grow his business quickly and eliminate the current stress.  Ah, the charmed life of an entrepreneur!

The same example applies to the current state benefits debate.  The states built the benefits packages, attracted the employees with it, and now revenue has fallen short and the states can’t afford to pay the benefits packages they previously negotiated.  The current path is simply unsustainable.  State employees refuse to have their benefits reduced and I fully understand their argument and actually agree with them. However, if a reduction is not made to the benefits in order to bring them in line with revenue, the state will be forced to restructure in some way; maybe even lay-offs.  What would you do if you were faced with this crisis?  It’s not an easy question to answer.

Remember, running a business successfully does not need to be complicated.  Keep it simple!

https://portalcfo.com/2017/06/23/business-growth-planning-preparing-future/

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