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Material Handling Wholesaler Cover
December 2017
Enjoy the December cover story as Dave Baiocchi helps you transition from supplier to strategic partner

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Close it and plan it
Garry Bartecki
Garry Bartecki

I mean let's close out 2016 and get the plan for 2017 finalized so that you can start implementation on January 2, 2017. Are you prepared to do that?

What I mean when I say "closed out" is the following, at a minimum:

The banks accounts are reconciled and all open items cleared.  This should be done monthly with only minor corrections to make in December.

The Accounts Receivable account, net of reserves, represents a reasonable collectible balance that will be converted to cash.  Bad accounts have been written off, credits issued where necessary, interest charges reversed if you don't plan to collect them and accounts sent off for collection where necessary. It is also a good time to review how your credit app and new account acceptance policy is working. This process also can be finalized earlier in the year to avoid the December crush.

All inventories should be counted and valued and adjusted at least once a year.  If you keep your count records and adjustments worksheet that should be good enough for the auditors as long as they can review the process.  Cycle counting works and allows you to spread the pain over the entire year.  

Both long-term and short-term rental fleets should be reconciled. Go through your utilization schedules to see which units have little or no hours on them for the current year and (1) see that you still have them, and (2) determine what is wrong with them and what it would cost to fix them.  List the units to be sold or replaced. Schedule repairs for the ones that are salvageable. This process to can be completed other than at the year end.  I also like to get an annual desk top appraisal of my fleet so I know what the OLV are. I use this information when in discussions with my bankers and as a source to price used equipment for sale.

Fixed assets should go through the same process as the fleet. I also include leased equipment in this process.  Do we have them all? Do we use them all? Are major repairs around the corner? Is it the time to replace any of them?  Is it a good time to make a deal with the equipment dealers?

On the liability side we need all the 2016 bills processed by January 10th.  We also need all commission reports completed and approved by the 15th. Bonus pools and profit-sharing contributions need to be finalized. It is also prudent to calculate bank covenants every quarter so that adjustments can be made and surprises avoided.

By now I hope you are getting the point.....YOU CAN CLOSE OUT 2016 EASILY IN JANUARY OF 2017 IF YOU SPREAD THE RECONCILIATION PROCESS OVER THE ENTIRE YEAR. In fact, you should have a draft of your final statement by January 15..... and be ready and able to tackle 2017. Way too many people still don't know their operating results for the prior year until May or June of the following year.  Not acceptable any longer.  The goal should be a 5-day monthly close and a 15-day, year end close. Today's systems allow you to do this.

Tips for 2017

From what I am seeing the forecast for 2017-18 is soft for material handling equipment. Of course there are exceptions to the rule by brand, model and location. So you might want to review your purchase commitments for 2017 and keep them as light as you can. Knowing sales will be soft means, your after market efforts have to save the day.  Shoot for that 100% absorption rate.  

We know what the tax rules are for 2016. We don't know what they will be in 2017. They may change and they may not, but why give up anything when we can maximize our tax deductions for 2016 and create carryovers we can use in 2017and beyond.  I went through this drill and we decided to max our 2016 deductions using Section 179 and Bonus Depreciation knowing we would generate a tax loss we can carry forward. We did this to ensure that the 2017 taxable income was covered so as to avoid paying taxes on 2017 projected income. Who knows, the tax laws for 2017 could change, increase taxable income and require an annual tax bill as well as estimated tax payments for the following year.

There is a lot of talk about the worldwide economy and the national economy stating conditions are overheated, interest rates on the rise and that we are due for another recession.  What this tells you is "AVOID ADDITIONAL DEBT SERVICE"   and reduce debt as much as you can.  It also tells you to review all interest bearing loan agreements to determine if you should lock in a rate before rates increase.

Taking steps to increase productivity is a must for every dealer. We have discussed, and you have heard from many sources, how the IoT is applicable to your business. If you have not already, 2017 may be the year to start with digitizing your service department, equipment and tech dispatch, tracking units, service trucks and sales personnel using GPS.  If economic problems develop you will be far more efficient using these tools and be able to keep the biz moving using fewer payroll dollars.

To a PROFITABLE 2016 AND 2017.

Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail to contact Garry.