BUSINESS PROBLEMS AND BUSINESS ISSUES WE SOLVE
'Business Problems Solving Is Key For Continuity, Improvement, Competitive Advantage & Shareholder Value'
Performance and most common business problems
How do companies assess their performance and their outcomes? And guess what? Often the conclusion is that they are not very flexible and not very decisive when it comes to problem-solving ability and especially when it comes to their own change and adaptability.
The most common problems that organisations struggle with are:
• failing strategy implementation
- an inadequate persevere of the strategy in the organisation,
• resistance to and tired of organisational changes
- the lack of the force of change on many fronts,
• silo mentality
- an insufficient degree of transparency in the process chain and the inflexibility of processes and structure,
• lagging development
- the connection to a competitive environment and the individual needs of employees, a challenge that, among other things, is insufficiently addressed by HRM
In short, the adaptability of organisations to rapidly changing circumstances leaves much to be desired. Companies cannot operate decisively in this way, causing problems in the long term.
As a cause, the organisations themselves often mention the large gap between the top and the workplace. If there are problems, they are mostly not signalled by the board. And the bigger the organisation, the more often it happens that the senior management is too far away from the practice. A practice where the workplace exactly knows what is the need and what is going on, because of their customer contacts.
The top of the organisation loosens from the reality of the work. The employees, often also professionals, keep continuing to added value to the products and services. The board, however, is not paid for that kind of added value, but for their funds often only the profit and growth figures.
The difference in orientation - on the added value or on the financial results - creates tensions in organisations and creates a not fertile ground for organisational development, growth or problem-solving. The management of financial factors, the settlement and remuneration of managers on financial results and the increased power of the shareholder: these are all matters that have influenced the 'blown off course' of companies from what they once stood for. Without pretending that this is a complete overview, below are our experience of the past few years of the most common problems in the context of
• continuity development
• position improvement or achieving competitive advantage
• the creation of shareholder value (and indirect stakeholder value)
In which we as Consultdustry have a contributed and can deliver positive developments and positive results.
Financial business problems
image: 4 Types of financial business problems
Entrepreneurship is risky. The revenues do not come in automatically, and expenses continue with sometimes unexpected high setbacks. It may also be that a company gets into financial problems, through
• illiquid as an isolated problem should be soluble
- insufficient working capital, which requires further working capital financing, which in turn leads to higher interest costs
--- the amount of current assets is too high due to, for example, too large inventories and/or because debtors do not pay in full or in part
--- uncontrollable growth: due to rapid growth, the debtor's post is running up too fast, often causing unrest at the bank
--- economic crisis, then leads to a (worsening) cash flow of many organisations
--- a rapid decline in cash flow due to the outdated business model and/or lacking revenues, while the costs/obligations remain mainly at the same.
There are various key figures which the seizure of working capital can be assessed. However, these figures are limited because they are snapshots and the period in which accounts receivable, inventories and work in progress can be converted into money can vary considerably. In the meantime, daily events can occur the need or usage of the working capital: f.e. substantial orders with longer payment terms and additional discounts, projects with stagnating billing periods, etc. Credit management with for derogations mandate of the board is required to stay in control.
• unprofitable, a chronic financial problem
A company can suffer losses for years but still exist as long as there is (some) cash. However, when the lender closes the money tap, a chronic problem can suddenly become an acute problem.
• insolvable, a structural financial problem
If the capital structure of a company is not sufficient, we speak of insolvency, and it indicates the ability of a company to pay both short-term and long-term debt. The higher the leverage - the loan capital - the lower the solvency (creditworthiness). In itself, attracting more outside capital is not necessarily wrong. It can enable companies to invest and grow. But because borrowing costs interest and involves risks, the returns must be more profitable. Insovality, over-indebtedness, can arise through becoming a victim of customer debts problems (bankruptcy, debt restructuring) or other (once-only) bad business results/losses.
• cash flows dry out, a strategic financial problem
A company has a strategic problem when the board suffers from management myopia (short-sighted and inward looking approach). There is no idea of the changing future. This problem cannot be retrieved from the financial reporting. In addition to realising the current cash flow, it is of the utmost importance that the management focuses on increasing future cash flows. After all, business value always lies in the future and the generation of cash.
Basic financial skills and facilities
image: Basic skills to prevent financial business problems
A company must have many skills to keep the company financially healthy. The main are; insight into finances and adequate management information are a requirement, able to sell with a vital margin and efficiently dealing with capital. Some tips to prevent financial business problems are
• financial insight
Sometimes financial figures are not available or could not be available on time. A proper administration displays bottlenecks, signals on which timely action can be taken. Disdain, denying or ignoring such signals irrevocably leads to increasing problems, partly because time is indeed a determining factor.
• credit management policy
Everyone wants to do business and sign contracts, but financial settlements can never be underexposed. The order conditions (profitability), creditworthiness and the payment behaviour of customers is of utmost importance, and this will have to be checked in advance. And what to do with different credit management conditions? Or, in the case of non-payment, waiting is usually not useful. Not the most pleasant assignment but encouraging this kind of customers to pay is an inevitable necessity.
• customer base
Customers that are profitable and creditworthy are already a primary condition. But remember that one or a few customers is not a real customer base. Take care of both quality and quantity, a spread of risks and continue to build on expansion and better customers.
• dealing with setbacks
Occasionally, every company has to deal with financial setbacks. Recognise the setback, be alert and take action is the motto. However, necessary urgent actions are often suspended or panic attacks.
• cash flow-forecast
A good cash budget provides insight into the liquid financial situation. Know what when to pay and when payments come in. Know the bottlenecks and the risks, so that there is an overview and timely action can be taken.
- credit management operations
Organise strict credit management. Poorly paying debtors require a lot of time and money. As a company, clearly show that you are a supplier and not a financier!
- cash flow management operations
Investigate whether it can be improved. In addition to the risk, as already indicated, the costs of borrowed money are quite high.
• financing options
Know the possibilities and build and maintain relationships with financiers; banks and investors, etc. Take a proactive approach, share successes and plans, be honest and scan the possibilities. For a financial safety net for the future, for setbacks, but also for obtaining capital for expansion or lucrative deals otherwise. Also study possible alternatives such as grants, etc.
• market opportunities
Research this if there are attractive options. Perhaps through cooperation, or to undertake international business by importing or exporting over own national borders.
Financial problems consequences: saving or stopping the business?
image: financial problems means saving or stopping the business
If the business does not go well, outside help is indispensable.
I. Firstly for hiring advice to know the possibilities: to continue or stop the business in a different way.
II. Secondly, for drawing up an action plan and
III. Thirdly, to implement the action plan.
In principle, the following options apply to financial problems
*- continuing with the company, requires - at very short notice - a substantiation of profitability and validation of the company
• reorganisation and cost restructuring (probably also downsizing)
• obtain a bridge loan, overdraft facility and/or additional capital (arrange financing)
• debt restructuring, settling an amicable debt settlement with creditors and/or capital providers
• sell some business activities and/or assets (disinvestment)
• find a co-owner or business partner, for new impulses and capital.
• sales increase/improvement
* - voluntarily stop the company
• sell the company (M&A)
• business closure, to prevent greater damage this must also be planned
*- forced to stop the company
• suspension of payment (possibility of rescue from bankruptcy)
• filed for bankruptcy (applied by the owner or by creditors)