Operational Failures to Watch Out From

watchoutWhen it comes to running a business, several aspects or facets are to be handled. After all, a company is not made of one but several arms and divisions that make up its whole and one of them is operations. The thing is, many companies fail at this crucial aspect and that spells trouble and a pretty major one too. Mistakes are on from left to right and the occasional slips can make one dive head on first. Yikes! Here’s a list of operational failures to watch out from.

Failure Scenario: The One Man Show

Running a business all on your own is not only silly, it’s also a tried and tested route to failure. Organizations are composed of teams and teams are made up of people who work together towards a common goal. Failure to effectively disseminate tasks and micromanaging are a certified no.

Failure Scenario: One Day Millionaire

Resources have to be spent wisely, efficiently, timely and effectively. It is after all not easy to acquire resources. Cash is easy to spend and hard to earn. This makes it crucial to ensure that budgets are made, controls are set up, spending is managed and unnecessary and/or impulse spending is kept at bay.

Failure Scenario: Product Centered

There is nothing wrong about improving one’s products and services; however, putting products above customers would be an absolute blunder. Why do we sell? We want customers to buy and therefore products must be geared towards them, their needs and wants not the other way around.

Failure Scenario: Inventory Mismatch

Too much inventory can be a pain when it comes to overhead expenses. Too less on the other hand will call for shortages, missed deadlines and stock outs. Moreover, stocking up on unreasonable levels of inventory can create cash flow problems. There has to be a balance with all of these and proper inventory management is needed.

Failure Scenario: Map and Metric Absence

A goal is made up of a series of steps and these steps are a complex set of elements. Moving without a plan or a map will not only be confusing but it can also encourage lost of sight and focus. Also, businesses should audit, examine and measure their performance as they go says AABRS. This will help detect threats and problems faster thereby providing ample time and room for solutions.

Misconceptions About a Members’ Voluntary Liquidation or MVL

A Members Voluntary Liquidation or MVL is often marred with several misconceptions. Lack of understanding is to blame here. Both the general public and entrepreneurs alike need to identify what it really does to avoid any more confusion and therefore prevent false information from spreading.

Now, what are these misconceptions that we’re talking about? Take a look.

“It’s just like any other liquidation.”

On the contrary, it is quite special and one that many are not fairly acquainted with. To most people, liquidation only occurs when a company or organization is facing serious financial dilemmas which bring us to the next item.

“It refers to an insolvent company.”

This here is completely false. The thing is, even a viable, operational and profitable business can liquidate and this is by virtue of a Members’ Voluntary Liquidation or MVL. This method is only available to solvent entities that can pay up their obligations for at least a twelve month period. A statutory declaration of solvency that comes with proof will also be required.

Why would a solvent entity liquidate anyway? There are many reasons behind this. One is due to retirement reasons as when owners wish to enjoy the fruits of their labor. Second, there is risk aversion due. Third, the purpose of the company has expired or has been completed. Fourth, a qualified heir or successor isn’t present. Fifth, a significant member to the organization has retires, resigned or has expired.

“It leaves creditors empty handed.”

Again, a Members’ Voluntary Liquidation or MVL is not like a Creditors’ Voluntary Liquidation or Winding Up Petition where insolvency is present. A big factor and requirement in an MVL procedure is the fulfillment of all creditor obligations. Since the business that liquidates is solvent, it can therefore pay up its liabilities in full, and not proportionally or pro rata. In fact, enough assets and resources will remain after such payment. This remainder will then have to be distributed among owners and shareholders based on their percentage of interest in the business.

“It can harm credit standing.”

It won’t, not even a single drop. This is because the reasons for liquidation are not brought about by financing issues but rather for reasons as stated previously. Because taking a Members’ Voluntary Liquidation or MVL requires the business to fulfill all obligations in full, credit history and score remains in good standing.

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Keeping the Business Solvent

business-solvencyApart from profitability and growth, entrepreneurs also strive to keep the business solvent. Failure to do so can after all lead to the company’s demise so it’s only common sense to always keep it in check. The thing is such task isn’t exactly a walk in the park. It’s challenging if not more and will necessitate a lot of work. So how is it done? We’ve asked the experts over at AABRS to share their ideas on the subject.

First things first, what does being solvent mean? In its simplest explanation, it pertains to an entity’s ability to fulfill its obligations as they mature for at least within a twelve month period. It is characterized by a healthy level of cash inflow versus outflow and a ration of more assets over liabilities.

Such status is necessary to keep the business running because insolvency can lead to liquidation or a winding up petition from creditors. As mentioned, it takes work to maintain it and it’s not something that can be done overnight. That said here are some tips on how to keep the business solvent. Read up.

  • Keep records in check. – One way to easily detect a looming solvency problem is by taking a look at one’s financials. Of course, if records and accounting is faulty then it would cease to serve such purpose. This makes it important to ensure that such arm of the organization functions effectively, efficiently and timely.
  • Perform regular audits. – Examination of said records must also be done on a regular basis to be able to see and detect any threats as well as to pinpoint areas for improvement. Also, this should allow for risks to be detected early on so they can be stopped in their tracks.
  • Watch your receivables. – Make sure that cash is not locked up for long in their invoices and that receivables are watched to ensure that they are collectible. This also makes it important for the company to screen out customers before extending credit to them.
  • Manage credit wisely. – To avoid liabilities from growing beyond proportion, proper credit management is required. This entails the screening of all liabilities to be taken, the proper scheduling of payments and all other related tasks. Doing so will help prevent the company from taking on more credit than it is capable of says AABRS and thus in a way help keep solvency.

How to Act When Faced with Winding Up Petitions

winding-up-petition-liquidation2It’s 5:00 am and your alarm rings. You get up, go get a shower, eat your breakfast and head to work. Arriving at the office, you start to open your laptop and your phone rings. It’s your secretary and someone’s eagerly waiting for you: your creditors and their winding up petitions. Yikes!

That would no doubt be an absolutely awful day at work. It’s a nightmare and you wish you’d wake up stat! Unfortunately it isn’t. This is reality. Now what can you do?

But before we get to answer that question, allow us to explain winding up petitions a little further for those who find the term quite foreign to their ears.

A winding up petition is one brought about by disgruntled creditors after having repeatedly tried but failed to collect from the owing company. It is a legal and oftentimes final option resorted in order to force a business to pay up its debts. It shall be enforced through an order released by court after having proved the insolvency claim to be valid. Upon its release, the order shall put the debtor company into forced liquidation, assign a liquidator to sell of its assets and sue the proceeds to pay the creditors.

As the debtor company if such a thing happens to you, these are what you should do.

  • Call in an insolvency practitioner. – You need a professional for cases like this specifically one who handles and has the experience in insolvency and winding up petition cases. You cannot wing it on your own especially during a sensitive scenario such as a winding up petition.
  • Look for solutions and options. – Weigh out all the options that you have and check their feasibility, their costs and their pros and cons. You can go for a pre-packed administration for example or even contest the claims of the creditors.
  • Talk to the creditors. – You can talk to the petitioning creditors and come to an agreement with them. If you’re successful, they may withdraw but that should come with extreme efforts on your part.
  • Perform all of above fast. – Winding up petitions should be acted on fast. After the creditors appeal to court, the latter shall have seven days until an order and final verdict is released. It is only within that timeframe where the business can do the first three items in this list. After an order has been released, it shall be considered final.

When faced with insolvency problems visit http://www.aabrs.com/

What is Pre Pack Administration’s Advantages?

pre-pack administration liquidationIn the presence of a financial meltdown and insolvency, entrepreneurs need to make quick and smart decisions to solve the problem or at least minimize the losses that come attacking. One of the most sought after solutions today is the pre pack administration. But what is it about and what advantages does it bring? Our friends from AABRS have shared us some pointers below.

A pre pack administration is a legal and effective method of selling a business and its assets, in part or as a whole, to a trade buyer a third party or to the existing directors where it shall operate under a new company. In some cases, an agreement between seller and buyer may include a stipulation for a buy-back.

Benefits and advantages of a pre pack administration include the following:

  1. Restart and Reboot: Instead of liquidating and bowing out in defeat, a pre pack offers companies another shot at it. Consider this as a restart or reboot button. This process enables organizations to further lengthen and strengthen their going concern, pick up the pieces, figure out what went wrong, put it back where they should be and improve from there.
  2. Branding and Image: When insolvency and financial crisis looms, the best thing that any entity can do is to choose the lesser evil. In other words, opt for the alternative that although may not be pristine and perfect, deals you a better card. To investors, the business industry and the general public, pre packs are like restructuring and improving while liquidations are a complete surrender.
  3. Creditor Interest: When it comes to their interests, creditors will see to it that they are never at a disadvantage. Liquidation puts them in that scenario and they would more often than not opt for a better solution. Pre pack administration helps them get a better return among any other option.
  4. Jobs and Employment: The method also helps secure more jobs. Without having to close the business, people will get to keep their sources of income. We all know how finding one can be hard so it becomes a huge relief if employment is saved.
  5. Economy: A business closing down, whether voluntarily done or forced by court and law, hurts the economy. It stings badly and it would be best to avoid it. Opting for a pre pack helps prevent that from happening.

The Benefits of Going for a Creditors Voluntary Liquidation

liquidation meetingThe Creditors Voluntary Liquidation is a process initiated by the board of directors of an insolvent company after having reasonable grounds that the entity can no longer recover from its poor financial state. It involves the appointment of a liquidation and insolvency practitioner who will take care of asset valuation ensuring that they are valued for what they are actually worth if not more. A sale follows suit and distribution thereafter.

A CVL may not really come off as good news considering that it is done to close the company. After all, entrepreneurs want to grow not shut down. However, taking the Creditors Voluntary Liquidation route brings about advantages to entrepreneurs in more ways than one. Find out what they are as you read on below.

  1. Retention of Control

Unlike forced and compulsory liquidations, a CVL allows directors to retain a significant control or influence in the way the entity is shut down so as to minimize any further losses, improve asset recoveries and hopefully uphold everyone’s interests. This is true even with the presence of an insolvency practitioner.

  1. Avoidance of Wrongful Trading Consequences

Wrongful trading occurs when directors continue with sales and operations even under knowledge of the company’s insolvency. This dampens operations and worsens the entity’s financial position. Expenses are piling up. Unpaid debts remain. Creditors are not being paid. This can be seen as fraud in some ways and is therefore illegal.

  1. Protection from Personal Liabilities

When wrongful trading is proven, directors can be held personally liable. This means that creditors can claim not only from the corporate assets but also up to the personal assets of directors at fault.

  1. Prevention of Court Intervention

Your company can not simply escape their dues and liabilities. One way or another and somewhere down the line, creditors will take action. The most fatal of them all would have to be a Winding Up Procedure at Court which will put you into a compulsory liquidation. This forces you to wind up and rips out all control you have over the assets of the company. It also tarnishes image and branding for the company as well as its directors and owners.

  1. Legally and Formally Closes Business

The Creditors Voluntary Liquidation is a formal and legal means to cease operations and stop trading. It puts the company to a close, eliminating any unpaid debt and allowing all stakeholders to move on to better endeavors.

Visit http://www.aabrs.com/ for more information.