The year 2020 was highly unprecedented and led to a lot of problems for the global economy, especially for small business owners. If your company was lucky enough to survive the initial effects of the pandemic, it would have to face multiple challenges and market fluctuations in the post-pandemic era.
In such a situation, the only way to ensure
long-term viability is a carefully thought-out business strategy and financial
restructuring. Business restructuring is often regarded as a last resort, but
it is the most needed and effective one in keeping your business afloat. Think
of financial restructuring as rebranding.
What is Financial
Restructuring?
Financial restructuring is rearranging the
structure of your business to improve efficiency or profitability. This process
is undertaken when the company is facing heavy losses or needs a change in
management. Experts recommend companies to restructure after 5-10 years to
identify loopholes and weak areas.
There are multiple factors that may affect the
overall profitability of your company, like the global shift in demand, an increase
in the cost of raw materials, etc. The idea behind financial restructuring is
to minimize the effect of these changing factors on your business. Hence,
financial restructuring is an essential tool for the revival of a company facing huge losses.
Importance of Financial Restructuring for Small Businesses
After COVID-19
There are a lot of was financial restructuring
can help small business after COVDI-19 or any other global economic shock. Some
of the most important reasons why your business might need restructuring are as
follows:
Recognize
and Overcome Challenges
When your whole organizational structure is
overhauled, you need a financial expert to assess the current situation of your
company and identify weak areas to propose solutions. If operating costs are
overwhelming your daily operations and the entire business, you need financial
restructuring to keep your business afloat.
During the process of restructuring, top audit
firms in Dubai can help you identify weak areas of your business that are
proving to be a challenge for your company. It can also help identify things
that are not working in your business and need to be improved or eliminated
altogether.
Increase
Efficiency and Minimize Costs
The primary objective of every business is to
make profits and minimize costs. If your business is taking too many funds and
has increased expenditure, but is making comparatively lesser profits, then it
means it is lacking in some form and needs restructuring. Only during the
restructuring process can you see how your business is performing and which
area is taking most of your funds.
Thus, the process is restructuring is like a
cleansing ritual for your company that helps remove hurdles and increase the efficiency
and profitability of the business. Therefore, to save your business, you need
to restructure for streamlining operations and activities to enhance simplicity
and transparency.
Maintain
Healthy Cash Flow
Cash flow is the lifeblood of a business –
large or small. Maintaining proper cash flow is of paramount importance in
order to run a successful business. During the COVID-19 pandemic, one of the
most challenging tasks for small businesses was to maintain a steady cash flow
as global sales decreased.
The financial restructuring will help
businesses manage cash flow. Through a proper audit report from one of the top audit
firms in Dubai will help you identify your income streams and cash
flow. If the cash outflow is more than the inflow, it means your business will
soon experience losses and possible shut down.
Improve
Liquidity
Another grave issue faced by small business
owners was bad liquidity. Small businesses need to increase liquidity for
access to working capital as the business grows. A good level of liquidity is
essential for companies to face unforeseen events as it provides enough capital
for daily business operations.
The financial restructuring will help
companies improve their liquidity after the COVID-19 pandemic. During the
crisis, small businesses faced a real cash crunch with less working capital and
low sales. Financial restructuring of your business will help you increase
liquidity by restructuring your business debt and reduce overheads.
Debt
Maintenance
During the restructuring process, your debt
will also be restructured to make sure all your capital is not used for debt
servicing. Through debt restructuring, you can look for low-cost borrowing
options in the market as compared to current high-cost debt to minimize costs.
This will also improve the liquidity of your company and increase working
capital.
Restructuring is also essential for companies
that are insolvent and have problems in servicing their current debts. The restructuring
will make the company solvent and more viable for the future. Thus, it will
restructure the entire debt capital of your company and increasing efficiency.
Restructuring
for Your Company’s Survival
These are some of the important ways financial
restructuring can help your business achieve growth and stability after the
COVID-19 pandemic. If you want to achieve profitability and minimize expenses,
then do consider approaching a third
party accounting firm and undertake financial restructuring to improve your
business and make it as good as new. With the help of these experts, you can
streamline all your business operations and activities and increase overall
profitability.
Post a Comment