Will Companies Continue to Go Bankrupt?

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Will Companies Continue to Go Bankrupt?

When we examine Turkey from its founding to the present day, it is understandable that there were economic problems in the early years of the Republic. After all, the country was emerging from wars and the Ottoman Empire had effectively reached the end of its lifespan. Rather than calling it an economic crisis, it can be referred to as a period of scarcity.

In this article, we will focus on the last 50 years, which corresponds to the average age of the current Turkish population.

Unfortunately, this period has been marked by continuous economic and political crises, whether due to internal or external reasons. This has both held Turkey back and, regardless of who was in power, led to periods where we were so busy firefighting that we had no time to address the real issues.

A Brief Review

1970 – 1980: Oil Shortage and High Inflation

1980 – 1990: Political Crises Leading to the 1980 Coup, Which Weakened the Economy

1990 – 2000: The 1994 Economic Crisis, Devaluation, High Inflation, and the Impact of the 1999 Earthquake

2000 – 2010: The Banking Sector Crisis Led to the Sale or Bankruptcy of Some Banks. Although the 2008 Global Crisis Didn’t Manifest Strongly, It Still Affected Our Country.

2010 – 2020: Issues Such as the Coup Attempt, the Increase in the Number of Refugees, Rising Unemployment, Currency Fluctuations, Increasing Inflation, and Rising Foreign Debt Led to an Economic Crisis.

2020 – 2030: The Pandemic, the Kahramanmaraş Earthquakes, and Global Wars Also Impacted the Economy. And We Haven’t Finished This Decade Yet.

Just like a person who is constantly ill and whose body becomes so weak that even a minor cold is hard to overcome, our country has started to take much longer than usual to recover from negative situations.

To explain with a simpler example, a family is also as strong as its economic power. When your economy is not good, in today’s world, your education, nutrition, and health are also not strong. Considering that we face new risks every day, a poor economy increases the damage that family members will suffer from these risks and weakens the family.

Now, let’s get to the main point we want to discuss.

Are Our Companies Ready for These Economic Crises?

After every economic fluctuation, we hear:

“Such and such number of companies are facing bankruptcy, this many companies have closed down, companies are in a bottleneck.”

We have probably heard these sentences in different formats many times, and we have become so accustomed to them that we have started to accept them as true generalizations. “If there is an economic crisis, companies will go bankrupt, and this is natural.”

As a Chartered Accountant registered with the Istanbul Chamber of SMMMs, I can’t accept this so easily.

Every closed company is like a child that this country has invested resources in, grown, and valued. When a company closes, it’s clear that many of these resources have gone to waste, and replacing them exhausts the economy.

Reasons for Company Closures

Economic Factors

Inadequate Financial Management

Technological Changes

These are some of the primary reasons. But why can’t companies overcome these problems? Why do they face the risk of bankruptcy and closure?

I believe that some companies have already gone bankrupt but are not aware of it.

Unfortunately, in a country where it is very easy to establish a company, anyone who has a slight grasp of the cost/revenue concept can enter the market by copying existing ideas and businesses without introducing a new concept. They do this without knowing about pricing and economic strategies, market strategies, and technological strategies. They can engage in transactions with other firms and eventually harm that market before closing down.

These “ghost firms” skillfully exploit regulatory loopholes and have essentially already closed down without realizing it. When an economic crisis hits, they take the easy route by claiming, “The economic crisis ruined us.”

We Must Be Prepared

The understanding that we must urgently recognize and integrate into our lives is the necessity of being ready for the risks brought by political, economic crises, or wars that can occur at any moment in this country and the world we live in.

Companies aim not only to survive but also to make a profit, increase their market share, and grow. Therefore, the measures that need to be taken, starting immediately, are of utmost importance.

1. Review the Financial Structure Against Risky Situations
   • Financial structures must be examined to ensure resilience against potential economic fluctuations.
2. Review Pricing Policies
   • Correct pricing must be established in conjunction with product quality. Sometimes companies are unaware of whether they are making a profit, surviving solely on cash flow from sales. This can lead to bankruptcy with the slightest economic fluctuation.
3. Implement and Discipline Budget Methods
   • Many companies proceed without goals and plans, which has become a plan in itself. This must be urgently changed, and companies should get accustomed to working with specific targets, developing methods to act accordingly.
4. Develop and Maintain a Mentality of Setting Aside Provisions
   • Provisions help protect against risks during economic fluctuations. They help us consider expenses that arise during these times. Traditionally, companies only start thinking about risks when they become real, but the causes of these risks often stem from the past.
5. Improve Human Capital Quality and Introduce Performance Criteria
   • Human capital must be continuously trained to keep up with technological developments.

By implementing these measures, companies can better prepare for and navigate the unpredictable challenges that arise, ensuring not just survival but sustainable growth and success.

Technological Transformation

Companies’ tasks have become significantly more challenging. In addition to this, as the homework from the past 50 years, we must transform our companies technologically.

Not only must companies strengthen their economies, but they must also fortify their technologies. They will need to consider technological advancements as risk factors and allocate budgets accordingly.

Just as we cannot undertake the above measures alone and require the assistance of a financial advisor or a human resources department, we also cannot embark on technological changes alone. We must find the right partner and review internal processes to digitize them, educate our personnel, and change their vision to prevent them from clinging to old technologies or slow processes, thereby creating support rather than resistance on this journey.

Transformation of Sales Teams

Sales teams hold a crucial position in companies’ technological journeys. They are the ones who interact with customers, gather information, and transform this data into valuable “metadata,” which plays a significant role in shaping companies’ growth journeys. Every company may face technological limitations in converting this data into growth. Therefore, the upcoming period will highlight the emergence of technological partners and the organization of consultancy and coaching processes for companies.

Looking ahead, we foresee that “failure to keep pace with technological advancements” will become the leading cause of bankruptcies among companies. Hence, it is crucial not to repeat past economic mistakes in technology. We urgently need to review company processes and swiftly implement necessary measures.

In doing so, it is important to collaborate with the right partners rather than assuming “we know everything, see all risks, and take all precautions ourselves.”

“Let’s also point the needle at ourselves.

As we conclude, as a member of the Istanbul Chamber of Certified Public Accountants and Financial Advisors, we must guide companies in their financial transformation. Unfortunately, during this process, we haven’t fully embraced this role and focused more on their tax processes rather than strengthening their financial structures. We have contributed to the concept of minimizing taxes. Moving forward, we need to change this focus and concentrate on strengthening their financial structures rather than taxes. In the bigger picture, our focus should be on extending the lifespan of our country’s companies.”