Opportunities instead of stumbling blocks
Factoring
in restructuring
Competitive pressure, increased costs, declining customers: Many entrepreneurs in the SME sector know the reality – not every development can be planned. When traditional financing methods fail, alternatives are needed that take effect immediately.
What exactly does restructuring mean?
Restructuring refers to the far-reaching reorganisation of a company when risks that threaten its existence can no longer be mitigated with minor measures. The aim is to turn the company:
- to stabilise the economy
- to make it competitive again
- and to make it fit for the future
The goal: away from the crisis – towards stability and competitiveness. But this requires more than austerity. It needs breathing space. And this is exactly where factoring comes into play.
Did you know?
Around 80% of all companies experience a crisis within ten years. This means that restructuring is not an exceptional case – but a reality in a dynamic market environment. And often the beginning of a new strategic direction.
This is precisely where factoring offers a powerful solution to bridge liquidity bottlenecks, regain confidence and enable a turnaround.
"If a company gets into difficulties, it quickly lacks the necessary liquid funds to invest in future business or to settle its own liabilities. A factoring solution helps to resolve liquidity bottlenecks quickly and permanently."
Evelyne Knutti, Member of the Executive Board
Restructuring starts with a clear view - recognising the causes
If a company’s existence is threatened, it is on the verge of insolvency. A need for restructuring is often indicated by:
- Technological backlogs & long time-to-market
- Loss of key customers
- Increasing purchasing costs and decreasing margins
- Changed legal framework conditions
- Price pressure from new competitors
- lack of own funds & poor credit rating
The sooner countermeasures are taken, the greater the chance of not only rescuing your company, but repositioning it.
Our tip: Consultancy makes restructuring easier
Bring in external consulting expertise that can scrutinise both your company structures and the external environment from the outside and offer structured support.
With Full Service Factoring from A.B.S., you not only receive liquidity, but also a complete financing package for your restructuring phase:
- Analyse your situation
- Quick provision of liquidity
- Taking over receivables management
- Strengthening your position in the market
1. Financing function
- Up to 90% of the invoice amount immediately
- Remaining payment after receipt of payment
- No additional collateral required
2. Insurance function
- Protection against bad debts through del credere
- More planning security for your liquidity management
3. Service function
- Taking over the entire accounts receivable management
- Relief of your internal resources
How factoring works with A.B.S. in the restructuring process
- You deliver your service as usual.
- You submit your invoice to A.B.S.
- We pay up to 90% of the invoice amount within 24 hours.
- You receive the remaining 10% after receipt of payment from the debtor (your customer) less the factoring fees.
- We can take over dunning and receivables management on request.
Would you like to know whether factoring is right for your company?
Then it’s best to use our free factoring checklist. In just a few clicks, you can get an initial assessment of whether factoring is right for your company – simply, quickly and without obligation.
Five steps to the successful restructuring of a company
When it comes to leading a company out of a crisis, a viable and forward-looking restructuring concept is the key to success. What are the reasons why the company is no longer competitive? How can it be reorganised? And how can the restructuring be financed? These are all important questions that a plausible concept must answer. A typical restructuring project involves several phases:
Firstly, it is imperative to recognise all risks for the company and make clear decisions. Which measures are required in each individual case and how far-reaching the changes need to be depends on a detailed analysis of the situation in question. In addition to looking internally at work processes within the company itself, for example, it is also necessary to analyse all external framework conditions. This includes in particular
- Changes at suppliers, customers and sales partners
- Changing market structures in the competitive environment
Special attention must be paid to the analysis, as the processes and interrelationships are often very complex. Symptoms such as falling margins usually have a whole range of interlinked causes. These causes and their interactions need to be analysed and evaluated.
Once the weak points of the company, its environment and the framework conditions have been recognised and evaluated, far-reaching decisions are derived from them. Such a decision can be the outsourcing of parts of the business that are making losses, a change in market orientation or a new business model.
Our tip: the courage to change
Innovations in the restructuring process are associated with frictional losses at process and personnel level. This is in the nature of things. Employees should therefore be made aware from the outset of the background against which they are required, which goals are to be achieved with the planned changes and which advantages will result from them. Ultimately, it is always about job security.
As a result of analysis and decision-making processes, it is often necessary to fundamentally rethink the company’s business model. In many cases, the question arises as to whether new partnerships and co-operations should be sought. Whether services previously provided in-house should be bought in, outsourced or product lines discontinued altogether. In concrete terms, this means that for each measure, responsibilities must be defined and value contributions and implementation speeds must be determined. To ensure the success of the restructuring, it is advisable to rely on good monitoring and consistent controlling mechanisms.
Our tip: Don’t lose any time on the way out of the impasse
Speed, flexibility and sustainability are the key to successful restructuring. In addition to medium and long-term measures, ad hoc measures with a rapid, noticeable impact on cash flow and earnings should be developed and implemented. Ideally, there should be as little time as possible between the planning and implementation of these measures.
In addition to operational cost reduction issues, strategic aspects and – increasingly important these days – financial aspects must also be analysed and changed simultaneously. Only when liquidity and equity are secured for a certain period of time will there be sufficient room for manoeuvre to implement the operational and strategic objectives. At the same time, this ensures that the next wave of restructuring is not triggered after a short period of time.
Our tip: factoring in restructuring
Liquidity and a good equity ratio are essential in restructuring. It is also important to free up as many tied-up resources as possible. Factoring ensures the necessary flow of liquidity, thereby increasing the equity ratio and also relieving the burden on debtor and receivables management.
A sophisticated early warning system indicates the need for action to the company management in good time based on early warning indicators. Potential risks can thus be recognised at an early stage and another corporate crisis can be avoided.
Our tip: opportunity instead of necessary evil
Germany has had a law on control and transparency in the corporate sector (Kon-TraG) since May 1998. It obliges the management boards of listed companies to set up a monitoring system for the early detection of risks.
Secure yourself now
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from A.B.S.
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Further examples from practice
