What you need to know about Debt Restructuring

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Q. What is Debt Restructuring? 

A: Debt restructuring is the process of negotiating new payment terms with existing creditors. American Corporate Turnaround can help satisfy creditors with payments you can truly afford, ultimately avoiding lawsuits and bankruptcy. Restructuring may include reducing the amount owed, stretching out the time period for making payments to creditors or both. 

Q: What does this process do to my company's credit? 

A: If are considering debt negotiation your credit worthiness is already in trouble or shows serious delinquency. This is not a process to save your credit but rather save your business. Once your debt is gone, you can focus on rebuilding your credit. 

Q: Can I negotiate with my creditors on my own? 

A: Debt restructuring programs remove the emotion of you dealing with the creditor. Stress and pressure can impair judgment on decisions. Since we do not have this impairment, we utilize only one method, what is best for you. Furthermore, it is quicker and more efficient than you attempting to do this on your own. Since we create the plan for repayment, creditors feel more comfortable dealing with us knowing we are trying to restore your financial stability.

5 Ways to Gain the Upper Hand in Rate Negotiations

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The truth is, in the business world it is all about perception. How the vendor views you ultimately decides how he will treat you as a customer. Negotiation is a kind of psychological game we play, and like in every game there is a winner and a loser, the person with the upper hand while negotiating wins the game. Moreover, like for every game there are tactics or techniques which help you win, similarly, there are certain negotiation techniques which help you gain an upper hand when negotiating. These are as follows:

1. Every successful negotiator knows the importance of one imperative factor which helps them in getting a good deal. The factor is having a good knowledge regarding prices and rates prevailing in the market. Extensive knowledge regarding the market or at least good preparation of negotiating regarding the specific product gets you very far. The seller would get intimidated or find it hard to manipulate the situation and convince you if you already have a lot of knowledge regarding the product and the prevailing market price of the product, because obviously the reasonable price would be in line with the market price.

2. If you do not have extensive knowledge regarding the product of concern, then another way to gain the upper hand when negotiating is by pretending that you know. Now this is a rather difficult thing to do because even the best of actors can sometimes make it obvious that they do not have much familiarity. The best way to avoid such a situation is to simply gather basic information regarding similar products and the market rates of those products.

3. Confidence is another factor which ultimately determines if you win or lose the negotiation game. You being sure of what you what and being self-assured makes it hard for the other negotiator to manipulate you or deceive you. Confidence gives you the power to control the situation and resultantly, helps you get what you want out of the deal.

4. Another important thing that should be done is cross-questioning. When you cross question the seller, it puts him/her in an unnerving situation and is hard for him/her to answer cautiously and deviously. The numerous questions usually help you in finding out a lot of information which the seller might not have previously voluntarily mentioned. This very act gives you an upper hand when negotiating.

5. Lastly, it is essential to know the power of silence. When negotiating, if the seller puts forward an offer or demands something that is more than what you want to give, the best thing to do is remain silent. Especially when you do not have a lot of knowledge regarding the product and the market price, silence makes the other party get confused and usually leads them on to believe that the offered price is above your range. Thus, being silent and not overbearing leads you to gain an upper hand in negotiations and consequently a better deal.

Myth: 3rd Party Negotiators Will Ruin the Relationship between Customer and Vendor

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Many businesses go through phases of financial strain during their existence. The economy and other outside factors will cause fluctuations in cash flow and profits.  These negative cash flow cycles will provide a need for financial restructuring and negotiation by a third party. There is no need to consider bankruptcy and face the associated financial implications.  You have options that will help restore your profitability.

 

Once of the common myths is that third party negotiators will ruin the relationship between companies and vendors. This is usually due to a company not choosing the right negotiating party.  Third party negotiators like American Corporate Turnaround want both the company, as well as the vendor to experience a win-win situation.  In the current economic environment, many businesses are facing mounting payables with the slowdown of sales.  With the banking community reluctant to lend and credit card lines being reduced, companies are looking for a lifeline with their current vendors.   A third party negotiator will employ a methodology that will create a harmonious relationship between the company and vendor.

Benefits of debt negotiation:

*  Avoid Bankruptcy

*  Soothe relations with current vendors

*  Save time by allowing 3^rd party to handle all negotiations

*  Avoid legal fees

*  Create cash flow

*  Keep necessary supply shipments flowing

*  Salvage company’s credibility

 

At American Corporate Turnaround, our goal is to always preserve the relationship between our clients and vendors. American Corporate Turnaround explores all options that are open.  As we explore our client’s current balance sheet, we will be able to lay out all the alternatives so the correct choice can be made.

American Corporate Turnaround is a 3^rd party mediator between the company and the vendor.  We are experienced financial analysts and we are always striving to get the best result for our clients. As our slogan says “We Make Un-Payables-Payable”.

Business Turnaround

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To encapsulate the purpose behind the functions and the mechanism of turnaround companies, the concept of the term ‘turnaround’ needs to be understood first. Usually a company undergoes a turnaround when a company is facing managerial and financial crises for example increased debt, inability to cover taxes, increased expenses, low sales turnover, decreased profits, low employee motivation, lack of team-spirit among company management, and deteriorating client-company relations. Turning around is a step, mostly an intricate one, taken by the company in order to transform and refocus its managerial and financial aspects of the business into a better and profitable one.

There are various prominent cases present on companies that effectively turned around, McDonald’s and AOL being one of the most well-known. After the merger between Time Warner and AOL, AOL faced adverse impact on their revenues and profitability. The CEOs of Time Warner and AOL collectively adopted various strategies to turnaround the company like making available free content on the AOL portal to attract more online visitors which resultantly increased advertising revenues. Additionally, McDonald’s witnessed a drop in their sales and overall profitability due to their tarnished corporate image and deteriorating quality of operations. In 2003, the company announced turnaround plans and by 2004 they were observing proofs of a successful turnaround of increased profits.

In order to accomplish a successful turnaround, it is necessary to get involved with the right people. There are various service providers which provide step by step assistance in turning around companies in financial and/or managerial crises. The main purpose of existence of such service providers is to help troubled companies effectively deal with their creditors, improve the company’s balance sheet, reduce business debt and resultantly avoid bankruptcy or liquidation.

American Corporate Turnaround is a boutique service provider specializing in accounts payable restructuring. Accounts payable restructuring makes a company more fundable.  This service of Debt Restructuring helps companies improve cash flow and creating a financially healthy foundation for the business to strive. 

The service providers like American Corporate Turnaround take up the responsibility of directly dealing with the creditors, analyzing the financial s and developing a budget to service old debt. Thus, there are numerous benefits of associating with such service providers. Some of them include restructuring of payment modes into more flexible and affordable system, acquiring more time to effectively run the business instead of rushing into bankruptcy, no public record or humiliation, improved financial health of company through reduction in loans but increase in capital, etc. Moreover, most services which offer to facilitate company turnarounds also provide free consultation to the troubled companies. With existence of such a facility and easy availability of professional assistance and help, even small and medium companies should not feel distraught in times of managerial or financial crises. 

1099 Repeal Bill

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As a part of Obama administration’s health care reform, a provision was passed which required the business owners to file a 1099 IRS tax form to report the transactions above $600 each year starting 2012. According to the Small Business & Entrepreneurship (SBE) Council even individuals getting a rental income of above $600 were required to distribute and file 1099s annually.

In the report by the House Committee on Ways and Means, it is highlighted that the tax paper burden that is imposed with the 1099 provision is disproportionate to any of the improvement in tax compliance and thus, the requirement should be completely repealed. The President and CEO of SBE Council, Karen Kerrigan, stated that a need to repeal the 1099 is necessary for small businesses to flourish. According to her, the 1099 provision puts unnecessary burden on businesses which are trying to expand and invest.

When the 1099 tax provision was announced, a majority of the population argues that it would be a hindrance in the development of individually owned business, as well as the small and medium companies. The adherence to the provision was viewed as being something superfluous and the cost associated with filing of 1099 form was estimated to be too high for the small companies and entrepreneurs to bear. It was estimated that 40% of the emerging small businesses would have had to shut down operations. This would be due to the fact that the cost not only the cost, but additionally it requires the small companies to pay large sums of money to hire professional help for the proper filing of the 1099 tax forms.

Therefore, it was a celebratory day for everyone when the announcement was made that the 1099 repeal bill was passed with bi-partisan voting. 70% of the House members supported the repealing of the 1099 provision. Another fact that made people optimistic about the 1099 repeal bill is that the President himself stated that the 1099 requirement is something that can be compromised upon.

However, it should be mentioned that the Senate’s version of the 1099 repeal bill only addresses the health care law requirement of 1099 and not the rental income requirement. Moreover, the Senate would pay for the repeal by cancelling $44 billion from government’s discretionary spending. The White House, in a statement regarding administration policy, stated that it supports the repeal 1099 bill but it opposes the way HR4 would pay for the repeal.

Furthermore, the opponents of the repeal highlighted the need to determine the source of the revenue to make up for the loss that would be incurred by the government in tax returns. It is estimated by the staff of the Joint Committee on Taxation that the repeal would add more than $21.9 billion to the federal budget deficits over the period of 2011 to 2021. Senators like Carl Levin of Michigan have already started presenting amendments to cover for the potential revenue loss by suggesting introducing additional tax on oil companies.

Should I Outsource Freight Bills?

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 Prior to 1980 the transportation marketplace was very heavily regulated. The National Association of Freight Payment Banks was established to keep track of all the freight bills and to ensure banking requirements were being met by the shippers and the carriers. There were regulated parameters for credit extension in accordance to which the freight bill settlement was based upon.

In 1980, the transportation industry was deregulated, which allowed for the carriers and shippers to negotiate credit payment terms. Even though this deregulation added to the flexibility of firms to negotiate credit payment period, it also required them to follow a vigorous process of pre-auditing before freight payment is conducted. The process generally requires a verification of freight rates, accounts of previous payments, liability checks of shippers and validation of freight payment requirements. 

In order to avoid the hassle of going through this process, many companies outsource freight bills. Outsourcing generally saves the company money in three major areas:

• Reduction in cost of payment to account payables department and
• Cost of processing
• Reduction in accounting errors

There are various companies which offer the outsourcing of freight billing and auditing. By shifting the responsibility and hassle to these firms offering such services, this allows the business to focus on their core competences and not waste time and resources on processes that can be better managed by others at lower costs.

These outsourcing companies can reduce the occurrence of errors which ultimately costs the business considerable outlay. There will be reduction in duplicate entry of bills incorrect freight rates. Moreover, they will provide additional services apart from the basic freight billing like customized information regarding your accounts management. Periodic reports, carrier usage information and extensive professional information on freight related issues will facilitate the business in making informed decisions.

Regardless of the advantages, there are aspects which need to be kept in mind before outsourcing your freight bills. The company who is providing the services should be ISO certified and have proper certification and expertise in the field of accounts payable management. Also the firm should provide good customer service and efficiently resolve issues related to freight payment. 

Please note that the one of the main issues concerning outsourcing freight bills is that to insure a cohesive carrier-shipper relationship. In order to establish this point, companies, before outsourcing, should make sure that the service providers also ensure good carrier relationship management. To conclude, please keep in mind the possible issues that can be encountered along with the positive aspects of outsourcing freight bills. After weighing the pluses and minuses, it is clear that the smart decision is to outsource the service and focus time and resources on the core competencies of the company.

You can visit me in American Corporate Turnaround.