Corporate restructuring: Filtering dirty blood, pumping clean blood – Secrets from financial expert Le Trung Nam

Warning signs of declining financial health – Don't wait until the horse is gone to build the barn

A business with weak financial health will have clear signs such as lacking cash, having to manage to pay debts, losing credibility with partners and losing good personnel.

In particular, lack of cash is one of the clearest signs that a business's financial health is in trouble. However, many businesses only focus on book profits and ignore this important factor.

Expert Le Trung Nam shared: “The business is profitable, but the profit on the books is very high. In the end, because there is no money to pay the debts due, the assets must be auctioned and all previous efforts become meaningless.”

To avoid falling into the situation of "waiting until the last minute", businesses need to regularly monitor important financial indicators such as:

• High debt to equity ratio: shows that businesses are relying heavily on loans to finance business activities, increasing financial risks.
• Slow working capital turnover: This means that the business is having difficulty converting assets into cash to pay short-term debts.
• Reduced revenue and profits: The clearest sign that a company's business operations are facing difficulties.

This is like a regular health check, helping to detect abnormal signs early and take timely intervention measures.

Financial “Doctor” – Not Just “Prescribing Medicine”

The role of a financial consultant in the business restructuring process is not simply to provide financial solutions. They are also companions with businesses, helping businesses understand problems, find the root causes and build sustainable development strategies.

Financial advisors act as “doctors” to help businesses “treat” their financial illnesses. In this case, a good financial advisor not only has extensive professional knowledge, but also has the ability to communicate, negotiate, and persuade stakeholders. They help businesses deal with numbers, and negotiate with creditors, suppliers, and banks to find the best solution for the business.

When should you “refuse treatment”?

Financial consultants cannot always “save” a business. There are cases where the “illness” is too severe and there is no possibility of cure.

Expert Le Trung Nam said that he once rejected businesses that were at too late a stage, had no time left to process, or had a management structure that was too complicated, with no decisive decision-maker. When there is no consensus among stakeholders, restructuring becomes difficult.

The decision to refuse to restructure a business is not an easy one for any consultant. However, in some cases, refusal is necessary to avoid negative consequences for both parties.

Therefore, choosing the right time and seeking support from a financial advisor is very important. Do not wait until the “disease” has become serious to seek “doctor”, by then it may be too late.

Seize the “golden time” to restructure your business

Time is an important factor in corporate restructuring. The sooner problems are detected and timely interventions are made, the higher the chance of recovery for the business. However, this “golden time” does not have any specific criteria, but depends on the cash flow situation of each business.

Therefore, choosing the right time and seeking support from a financial advisor is very important. Do not wait until the “disease” has become serious to seek “doctor”, by then it may be too late.

How to find the right "doctor" and avoid "quacks"?

To find a suitable financial advisor, businesses should consult with experienced people, learn about the advisor's expertise and build trust through the process of contact and exchange.

Mr. Le Trung Nam advises businesses to find a “family doctor” even when they are healthy, so that when problems arise, they can contact them immediately.

How does a business periodically check its financial health?

Regular financial health checks are like regular human health checks, helping to detect potential problems early and take timely corrective measures.

For small and medium-sized enterprises (SMEs), hiring a separate CFO can be a cost burden. However, they can still monitor their own financial health by building a transparent, clear reporting system and separating the business owner's money from the company's money.

• Analyze financial statements: This is the simplest way for businesses to have an overview of their financial situation.
• Use financial indicators: Financial ratios such as debt-to-equity ratio, working capital turnover, profit margin, etc. can help businesses evaluate business performance and detect potential problems.

In addition, SME businesses can also periodically seek advice from financial experts to have an objective and independent view of their financial situation.

The Importance of Data: The “Guide” for Business Decisions

Data is the “lifeblood” of a business, the foundation for evaluating and making decisions in business restructuring. Therefore, building an accurate and complete data system is extremely important.

Mr. Le Trung Nam emphasized that the first step financial experts need to do is to get real data from the business. Everything the business has. And if they don't have a proper system with tracking records that still work well, the company should still build a standard system.

In short, building and managing an effective data system is an indispensable element for any business. Businesses can use management software, ERP or data analysis tools to collect, process and analyze data scientifically and effectively.

Epilogue

Corporate restructuring is a complex process that requires perseverance and effort from both the business and financial advisor. However, with careful preparation, choosing the right “doctor” and seizing the “golden time”, businesses can completely overcome difficulties and achieve success by effectively managing cash flow.