we have answers.
In our Small Business Restructuring (SBR) series, we’ve covered the introduction to the Small Business Restructuring Plan (SBRP), eligibility criteria, the process, and the role of the small business restructuring practitioner. Now, in part four, we explore the key components of a successful restructuring plan and how it can revitalise your client’s small business.
The Heart of the SBRP: The Restructuring Plan
A well-structured and comprehensive restructuring plan is the cornerstone of the SBRP. It outlines how your client’s business will navigate through financial distress, reorganise its operations, and ultimately regain viability. Let’s break down the essential components of this plan:
- Statement of Affairs: The plan should start with a clear and accurate financial information correctly reconciling assets, liabilities, and equity.
- Reasons for Financial Difficulty: In this section, your client should explain the underlying reasons for their business’s financial struggles. A candid assessment of the challenges helps build understanding and trust with creditors.
- Business History: Provide a concise history of the business. This context helps creditors understand the journey and potential of the business moving forward.
- Changes Made to Ensure Viability: Detail the specific actions taken to address financial difficulties and ensure future viability. This could include cost-cutting measures, operational changes, or diversification strategies.
- Tax Compliance: Ensure that all outstanding tax lodgements have been submitted to the Australian Taxation Office (ATO). Even if your client can’t pay the taxes immediately, compliance is essential.
- Financial Projections: Include financial projections covering profit and loss, cash flow, and balance sheet forecasts. These projections should be based on realistic assumptions and show the path to profitability.
- Funding and Resources: Explain how the restructuring plan will be funded. Will there be new debt or equity introduced into the company? Will the plan be funded from future trading profits or the sale of assets? Clearly outline the resources available to implement the plan effectively.
- Stakeholder Management Plan: Develop a stakeholder management plan that outlines how you will communicate with and gain support from various stakeholders. Include a stakeholder matrix to identify key parties and a communication strategy to engage them effectively.
- Debt Repayment Proposal: Specify how the company intends to address its debts to creditors. This should be a clear and equitable proposal that reflects the company’s capacity to repay.
- Continuous Monitoring and Reporting: Describe how the business will continuously monitor its financial progress and adhere to the terms of the restructuring plan. Reporting mechanisms should be transparent and consistent, ensuring all parties are kept informed.
The Road to Success:
A successful Small Business Restructuring Plan is the road to financial recovery for your client’s business. It should be a clear document that inspires confidence in creditors and stakeholders. By addressing financial difficulties openly, showing a clear path to viability, and demonstrating a commitment to compliance and transparency, your client’s business can increase its chances of gaining creditor approval.
If you have clients who could benefit from the SBR process, talk to us today to arrange a confidential consultation.