Structuring business processes – Valen

Structuring business processes is one of the ways to optimize the business of a company. In a broad sense, structuring is understood as a change in the organization of a business, the creation of divisions, separate business units, between which assets and functions are distributed. This procedure is suitable not only for an individual enterprise, but also for a group of companies. In a narrower sense, structuring can mean improving the financial, technological, property organization of a business.

Why should an enterprise change its structure? This is a difficult process that requires a deep analysis of the situation, the conclusion of new contracts, and the reorganization of working schemes. However, structuring has several goals at once. The first is property and management security. If one of the legal entities included in the organization goes bankrupt, the business will not suffer. The second goal is financial and tax benefits. By distributing functions among several companies, it is possible to optimize the tax base and reduce payments.

When structuring is necessary:

• during a crisis, financial instability;
• in the absence or insufficient investment;
• when there is a threat of decrease in profits, crisis;
• if there are problems with demand for goods and services;
• when management becomes technically difficult, laborious;
• when there are difficulties in making strategic decisions;
• if it is necessary to restructure debt obligations;
• when the business expands, management plans to reach a new level of profitability.

Stages of structuring business processes

Changing the structure of an enterprise is a complex, multi-stage process. It begins with a study of the actual state of affairs, identification and analysis of risks, assessment of the strengths and weaknesses of the business. For this, specialists can use different methods of calculating financial indicators.

The first thing that is assessed before starting the main process is the market potential of the business, its financial and production capabilities, the quality of products and services. At this stage, shall be studied material resources, assets, and with them – staff, who work for the company.

For each company, specialists develop a special structuring procedure. There is no universal, standard scheme for business transformation. Therefore, the second stage is the development of an optimization plan based on the information received. Experts create a model of how the structure of the company should be transformed, what connections, financial and commodity flows need to be created.

The third stage is the implementation of the created model. The plan is put into practice by creating new businesses or transforming existing business units. Property and personnel are redistributed between them, new contracts are signed.

What does the structuring of business processes include:

• correct division of financial flows;
• elimination of duplication of functions by different departments;
• liquidation of unprofitable enterprises;
• diversification of capital, making the necessary changes to the constituent documents so that control of the business remains with the owners (founders).

As a result, structuring allows:

• reduce costs;
• increase the profitability of production;
• shorten the production cycle;
• improve the quality of products;
• reduce technological losses, the number of operations, movements;
• reduce the number of managerial mistakes;
• reduce the number of personnel;
• to improve the performing discipline;
• improve the overall efficiency of the company.

Additional benefits of business structuring

In addition to the advantages already listed, there are additional benefits from changing the structure of the company. One of them is to improve the efficiency of production processes. It occurs due to the optimization of management, a clear distribution of organizational functions. At the same time, while transforming the company, ineffective business processes are eliminated.

Of course, after the change in the structure, the property and management security of the company increases. Business is being changed to reduce risks and mitigate the consequences if they occur. Nevertheless, the new legal entities continue to act as a single well-coordinated mechanism, since they have concluded appropriate agreements and established management.

One of the key benefits of changing the structure of an enterprise is a reduction in the tax burden. Compulsory payments are reduced because different tax systems can be used. Please note that we are talking exclusively about legal methods of reducing the tax base provided by law.

Optimization with the involvement of foreign companies

Many business owners also prefer to apply international business process structuring. It pursues essentially the same tasks as optimization on the territory of one state:

• attraction of investments;
• optimization of the tax base;
• efficient conduct of international operations;
• accumulation of assets in foreign banks.

Executives are worried about whether the regulatory authorities will have questions and complaints about the business after structuring business processes. Claims may indeed arise, but only in the case of illegal use of special tax regimes. The assistance of qualified lawyers allows to avoid these problems.

The same is applied to international treaties. The authorities will have no complaints if all processes are organized competently, with the participation of lawyers. However, deliberately dubious activities such as those that fit the description should be avoided: mergers of unprofitable companies for tax evasion and loan schemes aimed at illegal profit.