What is a business turnaround in financial terms?
By definition, business turnaround is when the business is experiencing a phase of inadequate performance and moves into a financial recovery period.
In simple words, the turnaround in financial terms is the restructuring process that takes place intending to convert the loss period into a profitable one whilst stabilising the business performance.
When is it necessary to proceed with a business turnaround?
Underperformance in a company’s financial capability or dysfunctions in the business operations can often contribute to business distress. Therefore, a company may see its value destroyed or ultimately fail without implementing rapid and decisive actions.
Therefore, when your business is starting to experience financial problems, your management team should begin determining the root of the issues before leading to irreversible problems, i.e. insolvency and liquidation.
Likewise, the management team should decide the implementation strategies that will recover the company’s financial competence and deal with problems arising from stakeholders and creditors simultaneously.
However, these financial processes are not something the company’s management can handle by itself since the pressure and stress of the situation, along with the daily operations, do not leave them time. Therefore, professional financial advice is needed since such problems are complex and may derive from various causes that may not be under the management’s range of expertise.
What indications signify that an organisation needs business turnaround professional advice?
- Inability to service loans or debt repayments
- Increase debtor/creditor days
- Decrease in profit margins
- Sector issues and market shifts
- Lack of management expertise, especially when managing a growing or shrinking business
- Constrained or lack of free cash flow
- Unjustified increases in working capital rates
- High staff turnover
- Reducing credit limits
- Declining credit ratings etc.
Why is it advisable to acquire outsourced professional financial advice on business turnaround as soon as possible?
An organisation needs to obtain early advice on current and forecast operational and financial challenges. Early intervention would allow professional turnaround experts to have more time to implement short and long-term solutions and proactively avoid further drawbacks when seeking advice late.
How RSM’s team of experts can support your business turnaround?
RSM’s business turnaround team has extensive experience in the business turnaround processes. Over the years, RSM’s advisory team has delivered successful results to many organisations across various sectors and has managed to overcome challenging and complex situations, restoring organisational value and securing a viable long-term future.
Successful business turnarounds require multiple skills, and by leveraging RSM’s local and global resources, our experts:
- detect the causes of underperformance and relate them to repairing and problem-solving strategies
- restore business performance while creating financial and operational stability to”make time” for the implementation of the business turnaround short term strategies
- secure business sustainability
- prepare and implement a recovery business turnaround plan that will boost profitability and future success
- support management in their decision making and keep them aligned with the new strategies aiming for long-term future success
- manage relationships with creditors and stakeholders
If any of the above indications sound familiar, feel free to contact us and discuss your case and concerns.
If your company’s financial reports indicate liquidation problems, in that case, you need to act with strategies and actions that focus on your business turnaround while ensuring client service continuation and long-term business success.