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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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.

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