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Financial Business Crimes

business crimesRunning a business is no easy affair. It takes a great deal of time, effort, money and skill to start one and all the more to maintain and build it up. One very crucial aspect to this comes in the form of finances. The financial side of the business is always one very tricky and sensitive matter to the point that it is fairly easy to commit mistakes. That said, here’s the list of common financial business crimes.

#1: Borrowing money when you don’t need it

Many entrepreneurs think that just because the bank is willing to lend, they are under obligation to take advantage of the opportunity. This mentality is under the idea that borrowing now when lenders are willing will be fine as they can simply set the cash aside for when they are needed. Wrong. Loans come with interests and these are expenses. If there is no need for it then by all means do not get one.

#2: Overdoing it with receivables

As much as possible, sales on credit should be avoided or at least minimized. Unless there is a valid reason for it and the entity has adequate skill and knowledge when it comes to their management, companies must do away to avoid the risks of bad debts, liquidity issues and collection headaches.

#3: Pricing goods and/or services too low

Many startups believe that low prices bring the money in. This could perhaps work but it does come with its consequences. For starters, this shall only be feasible for a short span of time. Low prices may mean inadequacy to meet costs and expenses in the long run. Costing should be regularly revisited to ensure that the entity is running on profits not losses.

#4: Overspending on unnecessary things

Many entities think that just because the bigger companies have it or their competitors do it mean that they should too. No two organizations are the same and what might work for one may not work for another. Do away with all the unnecessary and lavish expenses especially if they do not bring in value. Avoid the impulse.

#5: Over-hiring employees

The more isn’t exactly the merrier. Numbers do not necessarily equate to productivity. A qualified employee can do so much more than a team of under-qualified staff. Moreover, hiring way too much overhead will balloon up costs all while bringing in the same level of sales essentially lowering profits. Hire when only when you need to and make sure that they count.

Here’s our question for you. Have you committed any of these financial business crimes?

Why a Pre-pack Administration is Good for Employees

pre-pack-administration-londonA Pre-pack Administration is one of many solutions available to struggling business entities. In this scenario, a viable but insolvent business is allowed to be sold, as a whole or in part, in order for it to continue trading but under a new name without the burden of its debts.

The purchase shall be awarded to a trade buyer, a third party or one of the organization’s current directors. The old company shall cease to exist. Its operations and assets shall be transferred to the new entity under a new name. The cash for the acquisition must of course not come from the entity’s own pockets. Simply put, the pre-pack is a means for financially troubled entity to regain itself and to bounce back.

The reasons as to why such a solution is favored by entrepreneurs and business owners are pretty much self explanatory. On the perspective of the employees, the pre-pack comes with advantages too which we shall discuss further below.

  • It keeps the company alive. The procedure strengthens going concern which enables the organization to carry on and therefore save everyone’s jobs. Unlike a deliberate liquidation procedure, the pre-pack does not end the life of the business but rather prolongs it.
  • Operations are not disturbed. If any, the amount is so little that it is barely noticeable. The transfer is rather smooth which avoids any disturbances, delay and glitch in operations allowing the organization to function as it is.
  • The restructure paves the way for improvement. Part of the benefits that companies get out of the pre-packed administration procedure is the chance to improve itself, fix what went wrong and find new and better ways of doing things. This is good for employees because the entity recovers and progresses as a whole.
  • Everyone keeps their jobs. Or at least the majority does. With restructuring comes improvement and sometimes there is a need to lay off a few workers, at least those that have unnecessary or redundant positions. Although a pre-pack will not be able to keep all employees within the ship, it surely keeps the majority afloat. Unlike the case with liquidations, both voluntary and forced, everyone sinks and loses their source of income. With as pre-packed administration, the majority does. Although it is also important to take note that it is possible that everyone gets to keep their employment.

Misconceptions About the Members Voluntary Liquidation

liquidationThe Members Voluntary Liquidation or an MVL as others would prefer to call it is only one of the three types of liquidation. It is where the shareholders of a company, through its board of directors, adopt a voluntary winding up resolution and at the same time appoint a qualified practitioner as liquidator to facilitate the procedure, sell the business assets and distribute proceeds to all qualified parties. Check out

Among the three types, the MVL happens to be always riddled with confusion and heaping misconceptions. We don’t really wonder why as most people often relate the word ‘liquidate’ to losses which isn’t always the case. To better align our facts, we’ve listed down the myths versus the truths for everyone’s perusal.

Misconception: All companies can take on an MVL.

Truth: Only liquid and solvent entities can call for the procedure. In other words, these companies are operational and therefore can meet both short and long term obligations. Insolvent and financially incapable businesses are prohibited from taking a Members Voluntary Liquidation to avoid fraudulent misleading of creditors and illegal shedding of liabilities. This is why a ‘statutory declaration of solvency’ is required.

Misconception: Shareholders and owners get nothing.

Truth: This is completely false. Of course shareholders and owners are bound to receive from the distribution as the entity, being solvent as it is, can fulfill its obligations and is thus characterized by a bigger ratio of assets to liabilities and cash inflows to outflows. The order of distribution however will begin with creditors. They will be paid in full first before shareholders do.

Misconception: Directors and officers lose control.

Truth: Because the MVL is a voluntary procedure, the corporate directors and owners retain control over the company. The creditors do not gain any amount of control over the corporate operations and affairs. The entity even gets to appoint the liquidator in this case.

Misconception: It is taken to avid losses.

Truth: This is only partly true. Indeed, one of the reasons why some companies call for a Members Voluntary Liquidation is because they want to averse certain risks. This can be future losses brought about by an imminent factor that is unavoidable or difficulties due to the death, retirement or resignation of a crucial member of the organization. Other causes for the procedure include retirement of the owners, absence of a qualified and willing heir or successor and reinvestment purposes.

AABRS: Ways to Solve a Financial Difficulty

financial-problemsA financial dilemma is like having one foot six feet under. Businesses have monetary resources as their lifeblood and without it, one is sure to go into further problems if not a full on liquidation throttle. You have to stop it from its tracks, revert the scenario and get yourself back on track otherwise you have to ready yourself for a future shutdown. So what are the ways to solve financial difficulty? AABRS experts have the following advice for us.

  • Assess your performance. How well is the business doing? You have to make a careful examination and check the viability of operations. Find out what causes the problem so you can better target a solution for it. You cannot simply tape up a leak in the system. You need to replace, fix and upgrade it otherwise it’ll simply come resurfacing again and again.
  • Be proactive. Don’t wait out and put the matter off thinking that it will fix itself overtime. You need to act in the now, not later but today. Problems like this consider time not to be golden but of diamond value. Plus, procrastinating will only escalate the issue and make it worse.
  • Businesses without a budget or who have one but don’t use it walk blind. A financial plan is crucial in the effective and efficient use of one’s resources. It likewise ensures that all needs are provided for accordingly and are ranked by level of priority. A budget serves as a map and without one you are lost. Especially in a financial dilemma, its use is crucial. You may also want to revisit each and every item to ensure that your budget is indeed as best as it could be.
  • As much as possible, only spend cash. You need to avoid as much debt as you can thus assessing each and every purchase must be needed to ascertain whether or not credit is indeed needed or even reasonable. If cash does not tantamount to the necessary need and credit must be taken, be sure that the purchase is able to generate enough returns to pay itself over time otherwise defer the transaction.
  • Develop strategies and contingency scenarios. Part of solving a problem is preventing it. This is done through proper planning and the creation of contingency maps to address threats and risks. AABRS experts say that many businesses suffer lesser if not at all with the help of such precautionary measures. Visit their website

The Road to a Winding Up Petition Procedure

winding-up-petitionA Winding Up Petition (WUP) is perhaps the scariest thing that could happen to any company and we would not dare ask why. After all, the process ends up by forcefully putting an entity into liquidation whether it wants to or not as a result of a court petition brought up by unpaid creditors who have exhausted all of their means to collection. So how does the winding up petition procedure roll out? Below is the five step process.

Step No. 1 – Creditors’ Appeal

Creditors to whom the company owes a certain amount will first attempt to recover and collect from the latter by releasing a claim. Noncompliance after twenty days can entitle the former to seek assistance to harness a winding up petition. Oftentimes, this is the last resort attempted at given the expenses that it can cost creditors. This is also the reason why those that attempt it are those whose recoverable amount will be greater than their expenses. Once the petition is submitted, the court will then review it and if accepted, such will be forwarded to the debtor company deemed insovlent.

Step No. 2 – 7 Days to Act

The company is only given a maximum of seven days to act. This means that there is only a week tops to either pay the debt in full, pursue an agreement, engage in a dispute if the debts are doubtful or take on a Creditors Voluntary Liquidation or an Administration should the court and the creditors allow so.

Step No. 3 – The Petition Ad

After seven days from the issuance of the petition, the creditors will then be published a petition advertisement in the London Gazette as a means of making the WUP a public matter.

Step No. 4 – Freezing of Accounts

After the advertisement, bank accounts and all assets pertaining to the insolvent debtor company will then be frozen. Disbursements, sale and transfers of any form will be disallowed to avoid illegal distribution and protect creditor rights.

Step No. 5 – WUP Granting

With the granting of the winding up order by the court, a liquidator will then be appointed to liquidate the insolvent company. The latter will lose all of its powers and control over the company and there is nothing more that they can do to stop the winding up petition procedure. This is essentially the end and cessation of the business for them. The proceeds from all asset sales shall be distributed to creditors. to find out more on winding up petition.