Garry Bartecki headshot Garry Bartecki

Status report, please

Well, how is it going out there? You where you think you were going to be?

Are customers still buying at your best guess rate considering COVID-19? Even though customers are still buying, how much longer can that go on considering shortages of parts and materials.

Are you going to survive the PPP forgiveness test? Did you include the “forgiveness” in your income tax estimate for the current year? Remember you have one last chance to use the Bonus in 2020.  And if you decide to purchase equipment towards that end, will it show up by December 31, 2020 to allow the deduction?

How is your cash balance holding up? How about where you stand versus your ’20 budget? Are you closely monitoring AR and the approval process for new customers? The latest news is the Fed will hold interest rates low until there is a clear indication of a 2% average increase in inflation which could take two years to get here.

Does the bank still love you? Same question regarding your OEM’s and related finance companies. Time to review your bank loan and OEM agreements.

On the positive side are you seeing any “opportunities “in terms of new lines, small undercapitalized service providers, poorly operated competitors, or add-on products or services to sell to customers?

Are you pursuing technology to make you more efficient, easier to do business with, and at the same time inform customers of “deals” as well as required equipment repairs?

Are you in touch with dealers within your network to share ideas and information to help survive this pandemic? If not, you should. Those Currie dealer groups work! And they will put you on a path to improve profits and company value.

No matter how you answered any of the questions above every dealer or service provider needs to be cautious when it comes to keeping the company solvent, profitable, and valuable.

Personally, I have been updating the budgets every 60 days or so and making department managers explain any pluses and minuses relative to the existing budget in place as well as their support for the adjusted budget going forward.

At the same time, I am projecting out a cash balance for the end of each quarter using historical collection results and also taking into account all debt service currently on the books as well as any contemplated for the current quarter. I then extend this review to the end of the year or six months out whichever is longer. Obviously, the key to any budget or cash flow analysis is revenue projection. Needless to say, all departments need to provide reasonable budgets and have a plan to hit the quarterly results projected.

Any indication that cash flow is slipping or actual results continuously below budget indicates that certain direct and overhead expenses need to be trimmed to align with revenues. And the longer you wait to make these adjustments the more likely you will not survive the recession. Calculate what it takes to replace $1 of cash flow because I assure you once you do you will never again hesitate to adjust costs in a timely fashion again.

As far as I can tell prices are feeling the impact of COVID-19. THEY ARE ALL HIGHER! How will this impact your operating results or sales opportunities? Those fixed maintenance contracts will take a hit should parts and supplies increase in cost by 10% or so. Does it make sense to increase expenses for budget purposes? You can always try to pass on these cost increases at the risk of encouraging customers to shop the market.

There is no doubt that dealers with a meaningful “systems” department have an advantage. There seems to be a new warehouse going up on every block where I travel. These systems need to be designed, a budget prepared for approval, financing obtained, employees trained and a maintenance contract agreed to. Since these systems are the bread and butter of efficient warehouse operation the dealers who control these systems have a stronger bond with the warehouse user. Much easier to sell additional products and services.

The Bottom Line here is your operation needs constant management with a goal of maintaining positive cash flow.  Attain this goal and the rest is downhill.


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

Author: Garry Bartecki

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