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December 2017
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Bottom Line: Is there any doubt?
By Garry Bartecki

Is there any doubt? You bet there is. Can you believe how Washington, D.C. is leaving us with this unending pool of indecision about our economy, interest rates, GDP growth, income taxes, state and local taxes, and unfunded pension obligations? Not to mention the fiasco in Europe and elsewhere. This is the same Washington, D.C. who is also asking you to hire additional employees and take other risks without knowing where the economy is going. Sure you will.

I have to admit things seem to be improving in Q4 of 2011, but I am drafting this as Europe falls apart and Washington D.C. has announced the deficit committee failed to reach a decision about deficit reduction and revenue sources. The way it looks right now is that Europe can deflate any U.S. improvement if another government fails. I don’t know about you but I am getting tired of listening to this bull without anything being done to improve the situation.

Let’s face it, the U.S. cannot have 40 percent of the population not paying any income taxes. Nor can we continue to provide entitlements to the level we do. Cuts have to be made, pure and simple. On the other hand I can see the need for additional tax revenue, which can be achieved by simplifying the tax code. What I can’t see is having the 60 percent pay a lot more in taxes to pay for the goods and services used by the 40 percent. Everybody has to pay something.

Can’t work it out, how’s this? Let’s make this easy and just make a 10 percent across the board cut in all government spending, local, state and federal. Every private and public company in the U.S. has improved efficiency to cut costs and I do not believe any government has made similar moves. If my math is correct, a 10 percent cut reduces annual spending by a substantial amount with minimum job losses.

Cleaning up the tax code would take care of the revenue side of the equation. It would be pretty easy to add 10 percent to the tax bills with these changes. You wouldn’t even have to increase the rates because taxable income would increase. I like the national sales tax as well, because that helps with the “everybody” pays something requirement and will certainly help catch those who do not file returns but have plenty of income to throw around.

So, what does this all have to do with you and your lift truck dealership? It means you really have to stay on top or your strategic plan for 2012 and pay special attention to your customer’s business, since any minor change in international economics or events can change a good customer into a bad one overnight. Your customers sell and buy from overseas, and with the conditions being what they are in Europe, including the increasing strength of the dollar, a customer could see wide swings in sales activity, which in turn could affect the volume of business you do with them as well as their ability to meet A/R terms.

If there ever was a year to spend more time on credit and collections this may be the year. Make time to review your credit and collection policies, any related legal documents, credit applications, etc. It should be no surprise to anyone if you ask for a new credit application and financial information. Knowing what industry your customer services provides insight into how far you want to investigate this customer to see if credit terms have to change. I can see bigger accounts having a D&B report run on them to look for signs of declining credit ratings.

With all this turmoil going on it pays to know what markets your customer serves, who buys their products, where they buy their inventory items and the outlook for that supply of material. This will be money well spent because it will shore up the collection efforts and hopefully help you avoid a big mistake you could have avoided had you did your homework.

All leads up to “Cash is King” because you cannot afford to record a big, bad debt that will cause liquidity problems in your company. I suggest you schedule a lunch meeting with your CFO, sales manager and credit staff to review your policies and procedures, and work out a customer review process for your major customers. Having senior management review outstanding AR, daily collections and any account that makes unusual moves is unfortunately a requirement of this crazy environment we live in.

It’s easy to take your eye off the ball if you believe the economy is turning. But conditions have changed so much a customer that made it through this far could now fall by the wayside and cause a liquidity event. Conditions have been better but due diligence on your part to maximize cash flow and problem customers is still required and maybe even more so until international matters get resolved.

Garry Bartecki is a CPA MBA with GB Financial Services LLC. You may contact him by e-mailing editorial@mhwmag.com.
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