Restructuring is a formal process where your business – whether it’s the areas of operations, legal structure, debt, or some other aspect – is rearranged to make it more profitable or better able to achieve desired performance levels.
Typically, businesses entering restructuring are those already experiencing some financial issues. In this case, a budget can assist with minimising business expenses.
But what are the common mistakes that people make, and how can you ensure you don’t make them? Find out here.
1. Know your strengths and weaknesses
Awareness of your organisation’s strengths and weaknesses during the restructuring process puts you in a better position to carry out the necessary corrections to make the company viable or profitable again. Ideally you will have already carried out a formal assessment of this nature with the help of your restructuring experts.
For example, if one of your biggest strengths is brand recognition, you might be able to cut back your usual market budgeting during the restructuring process without significantly affecting sales. Generally, if you need to correct course during the process, knowing your business’s vulnerabilities could help you make smarter decisions about the adjustments you need to make.
2. Have the right team and staff
Having the right team and staff members supporting you throughout the restructuring process can be advantageous for your budget. As part of this team, and ideally sourced long before you start implementing the restructuring, you should have contacted business restructuring experts, who can help you and your staff stay on track in terms of budget.
Make sure your senior and line managers are aware of their duties and have specific measurable KPIs during the restructuring process so they can help reinforce changes. This could help you avoid costly delays. Other individuals in the organisation could have valuable insights on how to reduce costs and budget more effectively. For example, factory staff might have a better idea of what equipment is underutilised and can be sold off.
3. Organisation allows for things to run smoother
Restructuring can be time-sensitive and changes can happen quickly, and staying organised will help you meet your budget targets. Work through the restructure plan from your business restructuring experts methodically so you can stay organised.
Your restructuring experts will also probably have developed a new business plan, which will override your previous business plan. Stay organised with daily to-do lists based on these plans and utilise time and staff management tools to help you stay organised. If you’re prepared for the challenges and disruption that comes with restructuring, your business could adapt to these major changes more quickly.
4. Know what finances are linked
As you plan to restructure or begin the actual restructuring process, one key budgeting principle is to stay aware of what financial expenses are linked so you can stay within your budget constraints. For example, investing in another vehicle for your company would result in more money spent on petrol, and new equipment would mean extra maintenance costs.
On the other hand, if you’re restructuring your human resources, downsizing to a smaller office could help you save on leasing costs, but this could impact growth opportunities in the future. The key is to consider the immediate, short-term, and long-term implications of any new budget line items, as these can attract further unwanted expenses. Any money spent should have a direct impact on supporting improved profitability.
5. Communicate financial issues
Don’t keep your restructuring plans and budget secret. Your team should be aware of the details of your plans ahead of time so you can obtain their buy-in to mobilise the transition. Transparency, feedback and input, and communication can all help support the change process.
Additionally, sharing your financial issues and budget targets can motivate employees to do their part in reaching your goals. Employees have an interest in helping the company make the necessary changes for improved profits and revenue. By communicating financial issues, you could empower employees to achieve higher productivity and limit spending. Finally, they will feel included in the process and be less likely to resist the changes.
6. Budget your time
During this time of transition, you’ll want to keep a tight watch on your business’s budget as well as your time. Restructuring can involve significant changes within tight frames, so managing your time successfully is central to a successful transition. For example, you can set daily goals for yourself, the team, and the business. Work through priorities in order of urgency. Delegate where possible, and track how you’re spending your time. Take time at the start and end of each day to plan ahead and review what’s been achieved.
If you budget your time well, you hit implementation milestones on time and therefore allow your business and team more time to adjust course if it becomes necessary.
7. Be constantly aware of your costs and yields
Before and during the restructuring process, monitor and track your costs and incomings with care. It’s a good idea to overestimate your expenses during this period so you have a safety net in case you go over budget with unexpected expenses. If your business is affected by seasonal cycles and slower periods, be prepared for these leaner times and work these into your restructuring plan.
It’s equally vital to track sales, revenue, and profits so you’re aware of incomings and have confidence that your business remains viable during this period. Track your financial metrics – from gross margin profits to cash flow – as closely as you do your costs for a complete picture of where you stand financially.
8. Alter long term business goals/objectives accordingly
As you implement a restructuring plan and work to a strict budget for your business, you’ll need to adjust your long-term business goals and objectives accordingly. With your restructuring plan, you’ll most probably have an updated business plan outlining your new long-term business goals and objectives. If you implement a new budget, this could also impact how realistic and achievable your new business goals (as outlined in your business plan) are.
With your new budget, consider whether you might need to again update your business goals and objectives, and/or push back timelines so they’re achievable.
9. Monitor business and employee performance on a budget-level
Tracking and monitoring your budget outcomes is essential for reaching your targets. Enforce your budget by monitoring business and employee performance on a frequent basis. Check that departments, teams, and individual staff members are attaining their cost-cutting targets or section budgets where possible. If you hold individual departments accountable, you’ll motivate them to stick to the budget goals and save more during the restructuring.
At the same time, tracking outcomes will tell you whether you’re reaching targets and perhaps if your goals are unrealistic or outdated given new developments. You can then adjust your projections and goals accordingly and implement other budget enforcement strategies.
A budget supports your restructuring process
Having a formal budget lets you communicate financial targets to staff and obtain their buy-in. With a budget, you can benchmark outcomes and hold individual departments to account. Ultimately, a business budget can support your restructuring process, allowing you to minimise cost blowouts during the transition and avoid unnecessary expenditure.