Legal

6 Common Pitfalls In Business Transactions

6 Common Pitfalls in Business Transactions

Business transactions can go wrong or fall through for a number of reasons. No business is a hundred percent void of risks, thus the only way to mitigate or prevent damage is to be prepared for potential shortcomings. A company that lacks legal counsel and awareness is more susceptible to loss and liabilities. Florida Business Law Attorney conveys that preventative measures are always supreme to corrective measures. The following transactional pitfalls highlight the need of due diligence and pre-planning to ensure smooth operations and avoid an unfavorable outcome:

1. Inadequate Resources

Most companies lack a pre-transaction checklist that specifies critical requirements the designated management team has to fulfill before finalizing a business deal. It may come as a surprise, but inexperienced business owners fail to formulate an internal administrative panel that can organize and supervise transactions. Among small business, the limited numbers of employees are already juggling a number of unrelated tasks. They are not aware of their role or control in transactional matters.

2. Disagreement on Key Terms

Sometimes two parties allegedly working together do not see eye to eye in key matters concerning a business agreement.  For example, their opinions may not coincide on pricing, liability and compensation terms, and other covenants in a legal contract. Professional counsel and advice is required to understand different legal aspects of a transaction. This way you can determine where negotiation and/or comprising are feasible.

3. Delay and Loss of Momentum

Many promising business deals are lost due to ‘deal fatigue’ or loss of momentum during the transaction process. This happens because companies lack a definite or structured course of action for sale and purchase. The absence of timelines, deadlines, and objectives drags on the venture to a point where it becomes insignificant and tiresome. The success of a business transaction relies on efficiency and efficacy.

4. Loss of vital Staff

If your business has suffered after you let go of one or more influential employees, you probably have your regrets. It is possible that you took them for granted while you had them on board or simply failed to acknowledge their good work. You may have found replacements, but they were unable to pick up things from where they left. Business owners need to keep an eye on everyone working for them, so they can determine that who is worth keeping around long term. This way a strategic proposal can be established to motivate them to stay, as well an appropriate succession plan in case they decline.

5. Economic Imbalance

Stable credit conditions are necessary to keep up with customers and suppliers. You need a steady cash flow from sales to buy from suppliers and meet customer demands. Let us assume that your supplier allows you a period of 30 days to pay dues; in that case, it would make sense of offer client a time frame of 15-20 days. If you give a deadline beyond 30 days, this will likely result in a negative cash flow.

6. Poor Communication and gaps in Bookkeeping

More than often many micro-transactions get lost or ignored. The problem arises due to ineffective communication with the bookkeeper; they are not aware of all business operations and intermediaries, which leads to gaps in the record. It might seem like small ongoing payments don’t make a difference, but that is a big misconception. Apart from keeping the accountant in the loop, you must keep a copy of all transactions for personal reference. Keeping track of all expenses and proceeds will give insight of the company’s ROI, help recognize documented errors, and also assist in making informed decisions for future business.