Botttom Line Archives - Material Handling Wholesaler

On your mark..Get set..Go!

Garry Bartecki — Fri, 16 Nov 2018 06:00:00 +0000

Another year behind us….and by all indications it should have been a profitable year, one that increased company cash flow, equity and overall third- party value. If this is true… HORRAY for you. On the other hand, if your sales have been flat the last couple of years without any significant growth in earning and cash flow, you need to conduct an internal audit to find out why. (To be discussed in a future column) Before we get started let me tell you the ESOP webinar we had was quite good (if I say so myself). I even liked it because it did not get into the weeds or try to throw a lot of numbers at the participants. Nate Perkins from CSG Partners presented some easy to read slides along with a narrative that laid out the benefits of an ESOP whether the company shareholder plans to leave, stay or something in between. Being very familiar with the process I went over the pros and cons of the deal along with a suggested process that will allow a pending candidate to assure themselves that they have a tentative deal before they start spending a lot of money. Here is the link to the webinar. https://register.gotowebinar.com/recording/4410788045880436225 If you missed and may have some interest I suggest you go to the link and give it a go. Any questions, let me know. Now back to topic for this month. I have been pushing you for months to estimate your income tax bite for 2018 using the new law. If you did that you have a rough idea of where you stand, which when compared to 2017 tax law should be a bit different. I suggested this in the first place to help you decide what steps to take when reviewing your year-end balance sheet and income statement and any potential adjustments you will make to prepare for your year- end accounting, especially if you find yourself with potential taxes you would like to deal with. Those of you who have no idea how the new tax bill will impact our checking account will just have to wing it and hope you are doing the right thing. C-corps have a pretty good idea where they stand (starting with a 21% rate) but there are many changes to deal with in terms of fixed asset additions, interest expense limitation, NOL limitations, LKE limitations and many others. Flow-through entities (S-corp, LLC, etc.) have a much more complex set of facts to deal with. Not only do you have to deal with the limitations noted in the prior paragraph but also figure out what amount of taxable income is going to show up on our 1040 after applying the NEW DEDUCTION FOR PASS-THROUGH ENTITIES. Boy, that 21% C-corp rate is going to look very attractive to our Flow-Through readers because the NEW DEDUCTION may not get you to where you want to be. But before you tell yourself to switch from a S-corp to a C-corp, get yourself a real tax pro to review the consequences of such a move because based on what I am reading the switch may not be such a good idea. I have some articles I can pass along regarding the switch if you would like to see them. So, as you prepare for the year end I suggest you decide what adjustments and write-offs have to be considered. AR write offs and an adjustment of the reserve account Parts to write down or off per your internal parts policy A used equipment valuation to use when pricing units for sale Fleet adjustments: What to sell off by year end A review of material repairs that could be capitalized (per your policy) A review of tech performance for both productivity and efficiency. A review of your interest expense to determine what interest is subject to limitation. But let us not let the tax tail wag the dog. Have your books reflect your “true” income and EBITDA numbers so that you don’t have to go back to explain why your books are not really your books. Do your homework and get the proper level of professional help to explain the C corp issue if you plan to explore that route. One last pain in the butt to make note of. I have been getting questions about the new lease capitalization GAAP rules. These rules take effect in 2019 for public companies. So, they want to know what they have to do and what they can get away with in terms of your lease contracts. These questions will expose you to reveal your breakdown of the lease payment between equipment and maintenance. In short, they do not want to have to capitalize the leases, but with most of your long-term deals will require that they do so. And before you start thinking you will make the leases month to month …that don’t fly. Thinking of setting up a Lease Review program to help dealers provide lease info that meets GAAP to their customers for accounting purposes. Will speak to Dean about it to see if maybe we can do this through MHW. Boy, you have a lot on your plate before year end……better GO and get it done. Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail editorial@mhwmag.com to contact Garry.

The post On your mark..Get set..Go! appeared first on Material Handling Wholesaler.

Going once…going twice…

Wed, 10 Oct 2018 05:00:00 +0000

Material Handling Wholesaler (MHW) gave you an opportunity on October 10th to make a LOT OF MONEY within the next six months. I am referring to the webinar titled ESOPs for MATERIAL HANDLING, EQUIPMENT RENTAL COMPANIES /DEALERSHIPS, and RELATED INDUSTRIES. I hope you had time to attend and learn how this transition option can put a lot more money into your bank account and still allow you continue working with the same staff you currently have, knowing you have additional working capital in terms of the company income taxes you will no longer have to pay. I am sure you know that if you sell assets you need to pay the bank, the IRS and yourself. The “yourself” piece in this scenario is dramatically impacted by the sale of rental assets with zero or low tax basis. What the ESOP does is give you the opportunity to greatly reduce or defer any recapture taxes thus adding a significant amount to the “yourself” payout. This is a simple example of how it works. You sell stock to an ESOP….and keep your debt intact….and pay taxes at the capital gains rate if you choose. If you are a C-Corp you can roll-over the investment into corporate securities and defer the tax until you sell the corporate securities. The seller also gets a note for the portion of selling price that is not funded with new debt, which is normally paid after the cash payment (note) is paid off, usually in 5-6 years. The seller note also pays interest at a very acceptable rate which can produce a significant annual interest payment until the debt is paid. Once both notes are paid off, the employees have a company that could be worth $15 million, or more, or less depending on operating results of the company. Not bad for all concerned. But, and this is a BIG but you have to qualify to do an ESOP transaction. In other words, your EBITDA numbers historically and projected have to be able to fund the cash payout as well as other debt service and Cap x. If you can, you should investigate further to see if the ESOP works for you. As I have mentioned in the past….do your homework first and avoid spending a ton of money only to find out that you don’t qualify. Run your own numbers and get a valuation of your rental assets as well as other fixed assets (if a material number), and then present those findings to CSG Partners who can review them to determine if there would be a bank willing to finance your deal. If you didn’t get a chance to listen in to the webinar, click here to listen to it and if you have a question or need help with the “numbers” give me a call and we will get you through the process. Just remember the point here is to maximize your personal return while the company value is at a high point, as opposed to pushing off a sale because you wish to continue to work and then trying to sell it for a lower value because the next recession is upon us. With the ESOP you can do both. So Going Once…..Going Twice……SOLD to your ESOP….if you qualify. Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail editorial@mhwmag.com to contact Garry.

The post Going once…going twice… appeared first on Material Handling Wholesaler.

Time to do some of that financial stuff!

Fri, 20 Jul 2018 05:00:00 +0000

-Complete internal financial statements and supporting schedules for June and then Q2.-Time to review actual results against the plan for 2018.-Time to update the plan for the rest of the year with specific goals in mind.-Time to review new and used sales results to see which sales personnel need help.-Time to check out what inventory you have and what you have ordered for the rest of the year.-Time to review the rental fleet to see which units will be turning over within the next 12 months.-Time to decide which rental units should be sold off.-Time to set aside some time to study what technology you can make use of to make the company more profitable and easier to do business with-Time to study what the competition is doing in terms of new technology.-Time to consider getting an annual appraisal report for rental units as well as used equipment inventory. It is also time to prepare reports required by your banks, primarily financial covenants regarding debt service coverage ratios as well as debt to equity ratios. And finally, it is time to get the management team together to discuss what has happened so far and what to expect for the balance of the year. I want to get into the covenants a bit more, but before I do that I want to remind you again to ask your accountant to run an estimate of your 2018 tax return using the 2017 data they just used to prepare your 2017 return or an estimate you can give them for 2018 including changes in rental assets (bought purchases and deletions.) Preparing an estimate for a C-Corp should be straight forward, but for flow-through entities it is an entirely different matter. The Tax Cuts and Jobs Act made significant changes to tax rules for individuals. Some will apply to you and some not. But there are about 30 major changes you need to consider seeing how your tax situation will change for 2018. Doing this NOW gives you about six months to do some planning to mitigate negative results. DO IT! For those of you thinking you will just switch to a C-Corp to avoid the whole tax personal tax issue…..STOP THINKING THAT….. In most cases the total cost of doing the switch will not offset any additional tax you may pay now. And, we all know that the tax laws change regularly, and you would not want to make the costly change to a C-Corp and then have the reason you changed disappear because they changed the law again. Back to the covenant issue. Management should take an interest in the covenant calculations because if things are tight it may cause a change in plans. There are normally two covenants dealers need to contend with: Fixed Charge Coverage and Maximum Total Funded Debt to EBITDA Both calculations use the same calculated EBITDA number which is usually a trailing 12-month (TTM) calculation, which follows a formula developed by the bank for your personal situation. The point I want to make is that the TTM figure is net of special situations and other normalizing adjustments. So, you want to be certain you understand how the formula was developed and if any further changes are required. Fixed Charge Coverage is the adjusted EBITDA for the TTM/debt service requirements for the same period. This calculation is one management wants to pay attention to because when the coverage is close to the bank’s minimum it is time to come up with a plan to improve the situation before you wind up blowing a covenant which requires a waiver to avoid a default on the loan. In short, this is a GOOD COVENANT because it has the company’s best interest to avoid cash flow problems. The Total Funded Debt to EBITDA covenant is the banks way of stopping you from taking on more debt than you can handle. It is calculated as Total Funded Debt/Adjusted EBITDA for the TTM. It will probably fall into the 5-7 times range. While meaningful I normally don’t get too excited about this one if the Fixed Charge Coverage is within the covenant limit, BUT……THIS SITUATION COULD CHANGE DRAMATICALLY ONCE THE NEW LEASE ACCOUNTING RULES ARE REQUIRED TO BE ACCOUNTED FOR. Even though the new lease accounting rules don’t take effect until 2019 for non-public companies it is time to start estimating where you will be should you have to capitalize all your leases and start a dialog with the bank on what they expect you to do to comply with the new rules and what their policy will be in applying the new lease rules with existing customers. For many of you it is entirely possible you will be in violation of the one or the other of these annual covenants if you add a significant number to the liability side of your balance sheet. I suggest that dealers selling one OEM’s product get together to decide how to deal with this issue so that the accounting between them is somewhat standardized. It would also be a good exercise to find adjustments to use to improve covenant results. And finally, this meeting would also be good time to discuss how customers will treat leases related to your long-term fleets. So, look at where you stand now in term of covenants and then plan out what you will look like after the new rules take effect. Doing this work now will also help you understand what our customers will be asking for to calculate the impact of your leases on their books. Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail editorial@mhwmag.com to contact Garry.

The post Time to do some of that financial stuff! appeared first on Material Handling Wholesaler.

Sometimes problems = opportunities

Wed, 20 Jun 2018 05:00:00 +0000

As you well know, every industry goes through a kind of repetitive cycle to the point where management knows how to mitigate the negatives and come out the other side of the dip right side up. And, I am continuously amazed how highly leveraged dealers such as yours manage your way through the dips which provide lower sale numbers and related cost cutting measures. I guess if you experience these cycles long enough you learn how to anticipate the cycle along with steps to take to keep the ship afloat. But since the last major recession in 2008-09 the landscape appears to be different. Some of the financial gurus are saying we have moved from a business cycle to a credit cycle and that the abundance of credit and loose credit policies is what is going to cause the next dip. But, if that is the case, are the indicators that you usually use going to be “the indicators” or will they now be false indicators which could leave you over confident and carrying a higher risk quotient. After all ….what is there to worry about. Interest rates are low, inflation manageable, public company profits are high, financing is readily available, new tax laws encourages capital spending and business is great. Sounds good, does it not. 2017 was a good year and you are expecting 2018 to be much of the same. I can’t imagine what you could possible add to the management meeting agenda other than a shortage of techs and long lead times for equipment. Is there anything to discuss along the lines of preparing for the cycle? Before you answer that, consider what I mentioned previously about this not being a typical business cycle but perhaps a credit cycle you have to deal with. If that is the case…does it change your thoughts about a credit generated recession and how it will impact your business? With a credit cycle, the gurus are saying the business borrowed too much because they could and low interest rates made it comfortable. Add customers into the equation with a much higher subprime portion of total debt and sooner or later someone is going to say I can’t make these payments and drop the keys off at your front desk. From what I read once a few big defaults occur because falling sales deplete cash flow to the point where the debt cannot be serviced, a demand to offload debt will be created, which will decrease asset values because everyone is dumping everything they can to generate cash flow to pay the bills. I do recall 2009 when I was asked to sell off my inventory and rental fleet to generate funds for the banks. I am sure you remember as well. What started me on this topic this month was a paper I read concerning GM and how they borrowed to pay bills because they didn’t earn enough via cash flow from operations. And, a big part of their problem seems to be the net cost of repurchasing leased vehicles. Then I connected the dots to include long-term lift truck leases and any related obligations that a dealer or OEM face to cover shortfalls in actual values versus the residual values used in the deals. From what I hear there is concern regarding the numbers of units coming off lease that were initially leased post-recession. So, in terms of this month’s topic, retired lease units may represent the problem…..costs you didn’t anticipate which could cause a decrease in business. A problem? For sure, if you let it be. But how about you covert the problem into an opportunity that generates above average returns. It will take a few bucks to get it done but the returns justify the program if you are positive you have the means to make it work. We are talking about buying some of those retired rental units from the OEM at an attractive price, go through the unit and replace what needs replacing, put a reasonable paint job on the unit and either add it to your rental fleet (and get an additional 5-8 years out of the unit) or sell the unit as a refurbished unit with at least a one-year warranty and an optional extended warranty for the customer to purchase if they so desire. OEM’s may also find this program attractive especially if you buy parts from them to recondition the units. The trick will be to find a lender that will accept the fact that your work has extended the useful life of the unit and to finance it accordingly. If you prepare a complete file on the work you did on the unit that will help a lot. This type of refurbished equipment is being sold by OEM’s in the construction equipment business. They have zero time on the engines and you get a new plate on the unit certifying the rework and date it reentered the system. Banks are financing them and dealers and rental companies are selling them or adding them to their rental fleets. Play with the numbers…they work. Capitalize the rework repairs following the capitalization policy you have for tax purposes. Talk to your bankers or leasing companies to see what they need to work with you on such a program. Tell your accountant you are going to buy used units and refurbish them to add 5-8 years to the useful life and will be depreciating the costs over a 4-5 year period. The numbers should provide great ROI on short-term or long-term rental units. Sales margins should be way above average as well. In summary, the more of this you do, the higher your profits, ROA, and ROI; and cash flow improves. Questions? Let me know. Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail editorial@mhwmag.com to contact Garry.

The post Sometimes problems = opportunities appeared first on Material Handling Wholesaler.

Let’s be careful out there

Sun, 20 May 2018 05:00:00 +0000

Remember the TV program “Hill Street Blues?” It was one of the most popular cop shows on TV. At the beginning of each show the sergeant would brief the troops and his last statement to end the briefing would always be “Let’s be careful out there!” Good advice for their line of work. This month I am going to give you that same advice. Lift truck dealers…..Be careful out there. Why? For a lot of reasons. Some of these being: Disruption is with us Business is very good right now but as we all know the lift truck market can turn on you at any time. But this time is different because the entire material handling industry is going through disruption just like many other industries. Consequently, just riding out the storm (recession) that is sure to come may not be enough this time. I believe we can all agree that OEM’s would love to have fewer dealers to deal with. So they will help consolidate the industry and as a result be able to improve their marketing and sales effort, increase the number of national accounts, start selling parts direct and increase sales to rental companies. Where does that leave you? And, even after doing all of this, they will still expect you to hit your market share numbers. It is also no secret that the equipment distribution model is moving to a more value added service as opposed to a transaction where customers have to own or lease units. In short, they would rather just have units available as a service to move product when they need to move it. If they could avoid negotiating to purchase or lease units with associated maintenance services, and still find a way to have the utility of the units on hand to move product, I am sure they would consider it. Does this sound like a pure RTR transaction? It does sound like a pure rental transaction because that’s what it is. A rental company owns 100% of the equipment and the associated ownership and operating risks. It a unit breaks they fix it or replace it. If a customer needs more units the rental company will add them. If the customer needs fewer units they can return the excess units to the rental company. The customer only gets what they really need and want – to move product when they need to at the lowest cost possible. Could your company deliver this type of transaction? Maybe, but only after a lot of changes are made, some of which will lead to interesting discussions with OEM’s. The point here is, even though you have plenty of experience riding out recessions, this time your ability to recover lost gross profits that get you back to a 100% absorption rate may not be there to take advantage of. Unit sales margins will be further squeezed. Parts sales may not recover and your ability to renew profitable rental transactions may be almost impossible to do. It will take time for a lot of these changes to take place, but they are on the way and require every dealer CEO to take steps to investigate and mitigate these industry changes so that company profits and shareholder value are at least maintained at current levels. The value of a dealer seems to ride with the economic cycles. And most of you are pretty good making it through the recession and recovering lost value caused by the downturn. But what it is worth today may not be attainable five years from unless ownership takes steps to go with the flow and adjust their income steams to meet projected market conditions. From my perspective if you are close to getting out, now may be the time to investigate that option. How to protect your investment Really evaluate where you are with your dealership. No BS allowed. Be realistic. The numbers should be good right now, good enough to prepare a reasonable estimate of what it is worth. Also evaluate your ability to find other income streams you can sell to your customer base other than lift trucks. See if you find some related lines you could give you a higher absorption rate. Check out your tax situation regarding the sale of your business assets. While you are at it why don’t you calculate your normalized EBITDA numbers for the last three years and also work up an OLV estimate of what your rental fleets and inventories are worth. If you need some help doing this give me a call 708 347 9109 or email at gbartecki@comcast.net. I am not suggesting you will go out of business. What I am suggesting is things are changing and if you don’t invest in your company to adopt these changes the value of your business will depreciate to a lower number than you have today. Remember, last month I mentioned the ESOP Summit I am participating in May. ESOP’s, if you qualify, can deliver much higher net sales proceeds from the sale of your business assets. The link for more information is http://info.csgpartners.com/esop-summit.html. Check it out. Other tips of the day When you receive your 2017 company tax return, turn around and ask our CPA to run the 2017 numbers using the new tax bill. It will help you avoid surprises. There is a lot of interest in switching from a flow-through entity to a C-corp because of the new lower tax rates. This may work in the interim but C-corps produce a double tax on the sale of business assets that you may not want to incur. And I suspect that most of you will have tax depreciation deductions to offset a substantial portion of your taxable income, perhaps making the switch to a C-corp not really necessary. FYI, an ESOP transaction would eliminate the double C-corp taxes. With the stock market being what it is many dealers could have employees close to retirement with a substantial portion of their

The post Let’s be careful out there appeared first on Material Handling Wholesaler.

Use golden handcuffs to grow business

Mon, 23 Apr 2018 05:00:00 +0000

It is truly wonderful when business is good. You can pay down some bills. Have extra bucks to repair or replace needed equipment. Pay down bank loans. Pass out some bonuses. Take a vacation. Put some money in your retirement accounts. But then reality sets in. You have the business right there in front of you, but you don’t have the manpower to do the work in a profitable, efficient manner. What is going on? Where are the experienced workers you need to operate a material handling dealership? Qualified techs are in short supply. Sales personnel without a non-compete are non-existent. And if qualified candidates are out there how come you are not getting a fair share of the talent pool? So, the question comes down to what you have to do to first attract people to your company and, once you sign them up, convince them to stay the course. It’s the “convincing” part that gets tough because you are competing with every other dealer and rental company out there for worker services. That being the case your “convincing” has to be better than that being offered by the competition, but not to the extent where it puts you in the poor house. So how do you get there? Two ways based on what I am seeing out there. Improve employee benefit plan offerings Make your employees your partner. (Don’t panic-there is a win-win solution.) Both suggestions are employee benefit plans. One is pretty easy to do and the other more involved, but in addition to being an employee benefit it helps shareholders get money off the table as part of the implementation (win-win.) Share the gains When it comes to upgrading existing plans you can improve the services and information for managing retirement money. Most companies have a 401K where employees provide most of the funding along with whatever match the employer provides. I also suggest you consider a profit-sharing plan to increase your standing with potential recruits as well as existing employees. If the contributions are large enough you can stretch the vesting and almost be assured that employees will stay, especially if such plans are not available at other potential employers. This is the partnering piece of the puzzle because the contributions should mirror profitability – you have a good year and the contribution is larger. Both the 401K and profit-sharing plans are reviewed and managed by the IRS. There are annual compliance requirements, tax report filings, reporting requirements, investment decisions to make, and fiduciary liability issues if you manage the plans on your own. One option that is gaining popularity is the Multiple Employer Plan (MEP) which allows small employers to band together to obtain more favorable plan investment results and more efficient and less expensive management services. MEP’s take all the work off of your shoulders; place you in a large, powerful group in a unified plan; and provide the advantages of a stand-alone sponsor with avoidance of the expenses and administrative burden of a single employee plan. Bottom line….a sophisticated plan to manage retirement benefits without the headaches and cost of managing it yourself. If you wish to focus on certain levels of management or individuals you can use various forms of deferred comp, also with vesting schedules to keep the golden handcuffs in force. If you need someone to help you devise a plan or plans that will work for you, one option is Tal Diekvoss with Fiduciary Management Group. He can be reached at (920)318-1007 or tdiekvoss@fiduciarymg.com. ESOP benefits I have seen the advantages of ESOP’s for equipment dealers and rental companies. They can truly provide financial gains for both shareholders as well as employees, IF (and that is a big IF) your company qualifies for an ESOP transaction. In an ESOP transaction shareholders sell their stock or equity to the ESOP for fair market value. The shares owned by the ESOP are then allocated to employees based on compensation levels. Over a 10-15 year time period, the shares have the ability to gain value which in turn is transferred to the employee owned shares. Upon retirement the employee vested benefits are paid out to the employees over a period of time. What is great for the employees is there is no cost attached to this financial opportunity. Just do your job and generate profits and cash flow. It’s not a short term investment, but one that can be quite lucrative in the long run. Many ESOP member employees I connect with say they are satisfied with the results. But I am sure if I look hard enough I will find ESOP employees that had negative experience. Of course, there are No guarantees here….the company has to continue to be profitable to make it work. ESOP’s are also great for shareholders because of the tremendous tax and other benefits associated with an ESOP transaction. You all have to transition out at some point and even if you are not ready to retire the ESOP can make financial sense to complete now and keep working until you retire. Shareholders benefit, employees benefit and are inclined to stay for the long haul, and recruits will be enticed by the “shareholder” possibility. But before we get carried away let me say I am experienced in this area and have to tell you that you have to produce a clean set of books, a clean balance sheet, equity in the business and annual profits and cash flow. Otherwise it may be tough to complete an ESOP transaction. Seminar provides a chance to learn more I know the value of ESOP’s, but I also know there is limited knowledge about them in the marketplace. That’s why I have asked a few friends to sponsor a one-day ESOP Employee Benefit Seminar (at zero cost) on May 30, 2018 in Chicago. The purpose of the seminar is twofold: To introduce you to ESOP’s and other tools to help with recruitment and retention of employees. To help you

The post Use golden handcuffs to grow business appeared first on Material Handling Wholesaler.

What’s in your projection?

Mon, 19 Mar 2018 05:00:00 +0000

Why am I asking about your plans for 2018? Because based on everything I hear, read or see company owners are anticipating a strong 2018, and I assume you are too. What peaked my interest in business planning for 2018 was my attendance at an annual wealth planning meeting for bank customers to review 2017 investment performance and expectations for 2018. After a brief introduction one of the main speakers asked the attendees the following questions: How many of you believe the economy is on the right track? How many of you anticipate a bigger top line? How many of you are planning to hire more employees? How many of you are planning wage increases in 2018? How many of you will be making investments in your business in 2018? How many of you believe the tax cuts will help improve your business? How many of you are reviewing potential acquisition candidates in 2018? For all except the last question the majority of attendees raised their hands. And, the hands for the last question was also in excess of my expectations. Quite frankly I was taken aback by the responses after listening to the media talking heads telling us repeatedly about bubbles and the next recession that is right around the corner. Obviously, the attendees at this meeting didn’t see it that way. And after the two presentations regarding the economy in general and the stock market metrics for 2017 and those expected in 2018 the general consensus was that any correction is probably at least two years off. In summary, two professional presentations, supported by historical and current metrics reflected some really GOOD NEWS. So let’s assume that you would respond in the same way as the attendees at the wealth planning meeting. If so I hope you attain the results you expect. But, at the same time I hope you planned out this continued growth cycle with the thought in mind that it could end rather quickly 18-24 months from now. In other words, taking on debt service commitments or contracts that cover an extended period well over 18-24 months out should be given careful thought before signing on the dotted line. What we are talking about is increasing fixed costs which will remain in place once the correction is upon us. Rents, lease payments, investments funded with long-term debt, investment funded with five-year debt. That monthly EBITDA number you review on your monthly financials, as you well know, has to cover your debt service or you will incur cash flow problems that can lead to financial distress. So what is in your projections for 2018-19 and HOW WILL YOU FUND the investments and expense increases related to the questions? Good question, and one where you should have the answer for on the tip of your tongue. And if you don’t I suggest you spend some time with your management team to get the answers to the question. Funding comes in many different packages. Sales increases of existing products and services New products and services Margin increases (Price increases) Expense reduction Bank financing Bank refinancing Shareholder loans Shareholder capital Partnerships Increased productivity Personnel adjustments as result of IofT Sale of business segment And, so on So many opportunities and so many options. Where do we start? We start by assessing our own company to see where we stand in terms of both balance sheet status and cash flow status. If we are in good shape with plenty of bankable assets and hi-profit dealer cash flow, our risk tolerance may be higher than a dealer with a high leverage balance sheet and performance on the low end of the MHEDA DiSC report operating results. What we want to avoid is overextending ourselves no matter what our current financial status is, but rather work with what we have to improve operating results for 2018 and 2019 while hedging and protecting cash flow for when the correction actually comes. Most of the funding required for the changes noted in the questions are clearly variable. You can implement changes and increase expenses but can also reverse those cash outflows if you need to. Don’t forget the lead time required between the cash outflow for products and services delivered and the actual collection of cash. Leveraged dealers may not even want to invest at any level if immediate positive results are required to fund the expenditures. REMEMBER….. EVERY DOLLAR OF ADDITIONAL SALES REQUIRES ADDITIONAL CAPITAL. If you are fully leveraged you may want to work on the less costly alternatives to improve operating results. Believe it or not …..YOU CAN SELL YOURSELF INTO BANKRUPTCY. Obviously, acquisitions and other investments requiring substantial amounts of capital are where the bear traps lay. If you are a shareholder with many years of business before you, the risks can be overcome with a well-managed operation that can withstand a downturn. If, on the other hand, you are in a transition mode you may want to avoid such investments unless you can really assess the risk factor to be minimum…..because if you make a mistake it may take ten years before you are again in a position to sell at a price that works for you. So may questions……so many options….. Consider all of them when projecting out the next 24 months. Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail editorial@mhwmag.com to contact Garry.

The post What’s in your projection? appeared first on Material Handling Wholesaler.

CFO’s in 2018

Tue, 20 Feb 2018 06:00:00 +0000

We are all well aware that business keeps changing …and changing more rapidly than it has in the past. And by changing we are talking about everything including every procedure and strategy that has been a constant for the last 20 years. I believe they call it disruption. And all of you have seen or felt disruption which supplied both pleasant and not so pleasant results. The disruption in the material handling business revolves around technology, robotics and maintenance expertise in terms of having qualified technicians to service both customer and rental fleets. Companies that do not adopt the disruptive forces and do nothing to change the way they operate will eventually fine themselves short of cash because they lack adequate volume to support the fixed costs of the business. Keeping these disruption forces in mind, management has to create a strategy to meet disruptive forces head on, including individual programs for each department in the business. And this is especially important in terms of what your CFO will be doing in 2018. CFO’s, in general, are finding themselves not only providing financial data but also input regarding margins, pricing, cash flow, tax planning and overall risk assessment. CFO’s do this by tweaking systems and procedures as well as diving into data and industry stats to see where the industry and customers are heading and how your company can help them get there. Does your CFO have to be a shining star to deliver all of the output described in the previous paragraph? Hell no, he/she only has to stay aware of what it going on in the industry and company and then have a menu of service providers who can help you get to where you need to be. In fact, you are probably better off having various professionals available to your staff who specialize in the services they provide. I myself am a CFO and follow this menu theory because I have neither the time nor brain power to provide expert advice for all of the current technical topics we deal with. I also maintain a list of industry leaders who can lead me to the professional I need when I need them. I don’t care what kind of problem comes up because I have a contact who can help me deal with it. I do this all the time. And I have no problem sharing my “experts” as long as you are not my direct competitor. I would encourage each and every CEO to push their CFO’s into industry associations and meetings supplied by both MHEDA and OEM’s. I have had the privilege of attending industry CFO meetings and find that the trip pays for itself from what you learn during the two-day program. This doesn’t need to be complicated because you can make some calls to other dealers selling your brand and see if they would be interested in paying you a visit for such a meeting. Compare notes, procedures, accounting issues, state and local tax issues, banking arrangements, methods to increase margins, and anything else you can think of. Then do it again to see how the others implemented what they learned from the first meeting. I can guarantee you will want to follow through with a standard program to get together on a regular basis. So what should CFO’s be doing in 2018? Participate in MHEDA’s DiSC Report each and every year. Set up a template and get it done. Spend some time digesting the new tax bill. It is more complicated than you think. If you are a flow-through entity spend the time to determine how the 20% deduction works and the reasons it could be reduced in your situation. Also know the rules related to depreciation, interest deductions, entertainment deductions and other major parts of the bill. Be especially vigilant regarding state and local taxes because some of the federal rules may not apply in your state. Prepare a pro-forma tax return for both 2017 and 2018 and have it checked by your tax advisor to assure you are in the right church and correct pew. Spend time with management thinking about disruption. What could happen this year, next year, in the next five years? What if Amazon decided to get into the lift truck business using a list of local talent to service the units? Not impossible. We all know the business is different from what it was five years ago, with more rapid change to come. Better be prepared to deal with it. Good at what you do. Really? If you believe that raise your prices and have the CFO provide analysis on what the results could be. $ are always better than volume and if you have the products and horsepower to get the job done you should be paid for it. Every time we raise prices….they seem to stick without getting much pushback. Forget the income statement and provide more data regarding cash flow…..which is all that matters. If the bank account is growing it doesn’t get much better than that. Investigate financing alternatives in light of contemplated interest rate increases. Are you using swaps to fix your interest rates? Can you use more revolver notes as opposed to term loans to finance your rental fleets. Get more pure rental training. Lift truck dealers provide both short and long-term rentals. Learn what it takes to maximize cash flow from rental. Really investigate technology to provide better service as well as improve communication between staff and customers. If you are still killing 20 trees a day …you have a problem. Start by calling Winsby and they will get you started for a very reasonable price. Ask your staff and employees for ideas to grow the business. For ideas to improve margins. For ideas to better serve customers. You will be surprised and the ideas are FREE. But it would be nice to show your appreciation with $ and recognition. Review internal systems and procedures to find ways to

The post CFO’s in 2018 appeared first on Material Handling Wholesaler.

Round two

Fri, 19 Jan 2018 06:00:00 +0000

Last month I attempted to provide an industry specific review of the “NEW” tax reform bill. As it turned out the final version did not appear as expected and consequently I had to ask my equipment tax guy, Steve Pierson, to assist with his best guesses of what will appear in the bill. His Power-Point presentation outlining his best guess was available for review on the MHW website. And you will never guess what happened the day the bill was finalized and waiting for final vote before heading to the White House. As it turned out the day the bill was finalized was the same day the December version of MHW hit the streets containing my now “expired” version of the tax bill. Many changes took place between the House and Senate versions we were using, but there are still many provisions worthy of your review and many provisions warranting further investigation to determine if there is any long-term merit is applying them in your tax returns. So we will give it another try somewhat geared to equipment dealers or rental companies knowing full well that these new laws have to be converted into IRS legalize which may again change how you look at these new provisions. Before we start let me inform you that Steve Pierson works for Selden Fox, a CPA firm in Illinois. I again am using their review of the new bill and if you want a copy of what I am looking at you can go to their website and pull off two presentations prepared by Paul Rozek, CPA. One is titled “How will latest tax reform impact businesses?” And the second “How will tax reform impact individuals and pass-throughs.” And I will ask Kathy Regan to provide access to these two docs on the MHW website. Corp tax ratesFlat 21 % starting in 2018 Expensing and depreciationFor years beginning after Dec 31 2017 the amount a taxpayer can expense is raised to $1 million with a threshold amount increased to $2.5 million. Applies to both new and used equipment purchases but cannot generate a carryback claim, only carryforwards. 179 also includes benefits for nonresidential property improvements made AFTER property placed in service. You can’t write off a new building but can use Sec 179 to expense improvements to the property. Temporary 100% cost recovery for a 100% deduction for property placed in service after September 27, 2017. The big news is that it also applies to both new and used equipment. Deductions and exclusionsLimits on business interest – After December 31, 2017 every business is subject to a disallowance of a deduction for net interest expense in excess of 30% of business adjusted taxable income (as defined). This applies to both C Corp and pass-through entities. Adjusted taxable income is your EBITDA number for the year. You are exempt from this provision if your average gross receipts for the last three years does not exceed $25 million. A second exemption is also available for floor plan interest, but you may have to give up some of the 100% expensing to do so. Net operating loss deductionsFor tax years beginning after December 31, 2017 the two-year carryback is repealed, and only 80% of the gross taxable income and can be carried forward indefinitely. Like-kind exchange treatmentRepealed for personal property with a provision to allow completion of transactions entered into on or before December 31, 2017. A big deal for our friends selling construction equipment. EntertainmentDisallowed ….can’t say it any better than that. Accounting changesTaxpayers who meet the $25 million size limitation noted earlier can elect (after December 31 2017) to use the cash method of accounting for tax purposes. In this case you have to check to see if you qualify for cash basis accounting. Before you run off to use this method realize that you should keep your books on a GAAP basis and convert your year-end results to a cash basis if you decide to give this method a try. It may work for you and then again it may not. In many cases it provides a first year benefit and not much thereafter. So do your homework before jumping on the bandwagon. Personal taxesA ton of brackets and some changes both positive and negative depending on your circumstances. Do yourself a favor and take your 2016 1040 and redo it using these new brackets and other changes. You may be surprised. The biggest and most complex area of the personal changes deal with income from pass-through entities. The bottom line here – you basically get to deduct 20% of your qualified business income assuming you take a reasonable salary out of the company. This will take a little work to get it right for you. State and local tax deduction limitation$10000 limitation for both combined beginning after December31 2017. This could be a big problem if your company pays state income taxes and is a pass-through entity. There may be some planning to do regarding this section if you pay a substantial amount of state and local taxes. And don’t think about prepaying your taxes …..They will be applied to the year they apply to. Mortage interestTwo issues. Home equity loan interest deductions are suspended. And mortgage interest subject to limitations. Child care creditsIncreased to $2000 starting in 2018. I see a number of positives for equipment dealers in this new bill. But remember, we don’t let the tax tail wag the dog. Do your homework and assume these rules could change if the Dems take over the House and Senate in 2018. You don’t want to overpay but you also do not want to risk substantial amounts because you were too aggressive with these new provision. Need help …call Pierson (630 954 1400) …he knows your industry. We will continue to update you on these issues and new data is available. Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail editorial@mhwmag.com to contact Garry.

The post Round two appeared first on Material Handling Wholesaler.

Name your top three challenges for 2018

Mon, 20 Nov 2017 06:00:00 +0000

Before we get into a discussion about 2018 ….I have to say that the November issue of Material Handling Wholesaler was one to the TOP THREE since I have been involved with this publication. The cover story about warehouse technology driving costs down, Dave Baiocchi’s discussion of how procedures can lead to greater efficiency, and the columns covering a “manager checklist”…“how people do fail” and even my suggestion of the benefits of having outsiders help you analyze your business results…basically provides each and every one of you a discussion agenda for your next two or three management meetings and perhaps even helps you zero in on your Top Three Challenges for 2018. IF YOU DID NOT READ THE NOVEMBER ISSUE….STOP WHAT YOU ARE DOING, GO FIND IT AND READ IT! The lead article is what got me thinking about 2018 and beyond, especially in terms of how warehouse technology can both increase revenues and decrease cost, and how that same premise should apply to dealers who supply warehouse related products to their customers. The way I see it is if a business can both increase revenues and reduce costs…..they can most likely become a more competitive alternative in the marketplace, increase their top line and take market share. Which of course means you will eventually have to deal with them by meeting their pricing and lowering your profits if you have not reduced your costs to offset the pricing differential. And the world goes round and round. I personally believe that this scenario will play out as noted above because too many companies are doing exactly what I suggested….finding ways to reduce costs via technology, system upgrades, and internal audits to reduce “manpower” requirements related to clerical tasks. Improvements are all there for the taking, but will require some time and money to make things happen. What I worry about are dealers who are thinking about transitioning out of the business, recognize their shortcomings, but refuse to correct them because they don’t want to spend the money. Twenty years ago you could get away with that. But now, with the current rate of business change brought on by the IofT, the “put your head in the sand” approach will cost you because your operating results will generate a lower company value compared to what it could have been if required improvements were made to improve the bottom line. This is easy to understand…if other dealers on the sale block have both increased market share and reduced costs because of improvements they have made…which company will receive a higher value multiple…..yours or theirs….I think you know the answer. So, let’s assume you want to take action to improve both top line and bottom line results. Here is a plan to consider. Read the November issue…it will get you thinking along the correct lines. Get the latest MHEDA Disc Report and see where you stand. Have your industry specific computer system folks audit your use of the system…..to find ways to reduce time working on paperwork or how to eliminate paperwork Have the system folks review how management reports available in the system are being used (in many cases they are not.) Get a couple of successful dealer CEO’s you know that are not competitors and ask them to sit down with you for a frank discussion on how you compare to what they are doing. Make a copy of the Manager Checklist and review your managers against that list. This should get you started on the cost analysis piece of the puzzle, which should result in both lower outside costs and well as reduced labor costs. And so far, as I like to preach, you have not spent a lot of money. Next, review your use of current technology to manage techs and customer fleet data. Also review your use of technology to communicate with customers. Next, see how your company marketing and sales programs compare to what others are doing. These steps may take some investment to get them going, but again the cost recovery should be in terms of months…..not years. OEM’s should be able to supply assistance with the fleet data and how to use it. From the marketing standpoint I have been using Winsby and am quite pleased with the results….low cost, dealer expertise and a ton of useful data to generate leads and manage accounts. If you take these steps you will wind up with a lot of potential upgrades to consider for not a lot of money. Now all you have to do is understand what your learned and how to use it to reduce costs and increase revenues. Can you do this on your own? Do you have the internal horsepower to identify and prioritize what changes should be made. Can you get the management “buy-in” to push the changes and get the expected results? Well, if you are the CEO, that is your job and if you can’t handle it get some input from your board, other dealers, your OEM or whoever. Winding up in the same place a year from now IS NOT AN OPTION. So what are you challenges for 2018? INCREASE THE TOP LINE REDUCE COST MEASURE VALUE OF COMPANY PLAN IT OUT AND WORK THE PLAN Have a great 2018….and may the value of your efforts result in greater profits, cash flow and value. Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail editorial@mhwmag.com to contact Garry.

The post Name your top three challenges for 2018 appeared first on Material Handling Wholesaler.

Welcome aboard

Fri, 20 Oct 2017 05:00:00 +0000

No, not a typo. I am not welcoming you aboard my seagoing vessel. I am suggesting a method to improve your operations, better plan for the future and a way to prepare for your transition out of the business. And again, this is one of my “Don’t spend a lot but get a LOT” strategies. Based on my experience every privately owned business could use an outside board to oversee business operations, review financial metrics that measure and compare performance, assist with strategic decisions such as Cap X transactions, financing the business, potential acquisitions and in general discuss the future of the industry. In addition, every board would follow up on action plans created at prior meetings to learn how management actions are meeting company goals. To get maximum benefit from an outside board I support including a mix of members both inside and outside of your industry to get a broad perspective of changes happening across the economic spectrum. And it is extremely important to not get a lot of “YES” people on the board. What you need are business executives who will tell you like it is, explain how they see the market moving, express changes they see coming in terms of technology and the IofT, and have business acumen to understand your metrics and the decision making process. What you may want to avoid is adding to the board people who you are engaging the normal course of running your business. If you are doing business with them they will be reluctant to question your decisions for fear of losing your business. Manufactures, warehouse and logistic C-level personnel, wholesale or retail sales operations. These could be current customers or maybe not. Your goal with this type of group is to understand industry and customer needs and the adjustments required to meet them. Your corporate attorney would also be a good member. They understand the board process, can assist with the agenda and help resolve issues that may have legal implications. Corporate attorney’s represent a large number of business clients and thus have input and experience in many types of business transactions. I always want them there and normally they will tell it like it is. Other attendees at the meeting will be the president of the company (whether they own shares or not), the shareholders, the CFO, the COO and the sales manager for parts of the meeting. Outside guests could also be included as requested by management or the board. For example, your banker may be requested to discuss your credit lines or potential changes because of a business transaction your company in contemplating. So there you are…. two outsiders, your attorney, the C-level company personnel and guests as necessary. Five or six members. The chairman sets the agenda after discussions with the board members and the C-level team and follows up on open items from previous meeting. Minutes of the meeting are formalized and forwarded to each member within a couple of weeks post meeting. Normally two meetings a year seem to work. Lay out the dates to plan the current year, review results mid-year and have a clear idea where you stand close to year end. A meeting in Q4 (late Oct or early Nov) lets you see results through Q3, plan for year end, and plan for next year. A Q2 meeting (April) lets you review finalized annual results and allows for changes required for the balance of the current year. You can, of course, adjust the schedule to fit your needs. Some of you may need a third meeting depending on what is going on in terms of the life cycle of your business. Data needed for such meetings would include industry data to compare results against. The MHEDA DiSC report works well for this purpose whether you participated in the report or not. Both the AED Cost of Doing Business and the ARA Cost of Doing Business reports add perspective to the discussions. Economic and specific industry forecasts help with the decision making process. Year end and current internal financial statements including supporting schedules, including budgets are a necessity. Of course, participating in the MHEDA report which spells out the participants results against the report, provide a list of agenda items for discussion. Since we are dealing with the material handling business there are two or three items I concentrate keeping track of. The estimated OLV of my rental assets The age of my floor plan items The balance available on my operating and equipment lines Cap X requirements….both maintenance and growth My borrowing base Pre-tax profits and absorption rate EBITDA (to measure debt service capability) So, let’s make it eight things that keep me up at night. Most of which have to do with cash flow to cover debt service, covenant coverage, absorption rate and other balance sheet nightmares that make our industry so exciting. I just hate to manage this type of business worrying about financing issues. It is much more pleasant to know you have adequate cash flow to cover debt service and operating expenses without having to worry about it. Creating an outside board will help address both balance sheet and cash flow considerations because C-level personnel will need to justify both budgets and results to someone other than the owner. Probably a good idea. The times I have encountered an outside board environment it provided benefits well in excess of the cost to the program. Give it some thought. Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail editorial@mhwmag.com to contact Garry.

The post Welcome aboard appeared first on Material Handling Wholesaler.

Spend a little – make a lot

Wed, 20 Sep 2017 05:00:00 +0000

There is little doubt that to be successful in the future every dealer on the planet will have to upgrade their operations to include (1) digital systems that apply to all aspects of the business (2) robotics which are sure to become part of every business (3) adopt IoT with the various new products and applications offered, and (4) supply the training to make all of this work to generate a satisfactory ROI on your investment in your business operations. This is a big responsibility that every manager will be faced with. And it will be both time consuming and expensive. So what do you do and how do you plan for these events? To me that will depend where you are in your transition cycle. Dealers with the option of having many years remaining at the helm have to plan for and implement these new opportunities as they become available and workable in our industry. Owners getting ready to transition out will see it another way. “A large investment I will not benefit from.” In reality, owners near the transition point should plan to either move out in the next couple of years before these new requirements are upon us, or take steps to improve the value of their dealership with minimum investments. What can both dealers with a long-term outlook as well those with a short transition plan do to increase the value of their company with a minimum investment? I suggest you invest time and a few bucks to really get acquainted with your accounting and business system. Many dealers make the investment to install the system to get it up and running including the training that goes along with that process, but thereafter neglect addition training and review of what is available in the system that they are not using including new applications that have become available and are not being used. I can guarantee you that if you sign up for a two-day review of your system where discussions are held with personnel from each department and especially the accounting department, you will find more efficient ways to do the accounting and generate reports needed by management to run the business. The process will both save employees a lot to time messing with paperwork and accounting issues, thus making them available to do what you are paying them to do, which is make you money. In addition, the process assists with reducing the amount of paper you use and automates many of the daily, weekly and monthly reports generated. The return on this type of review will in the 60-day range once you implement the improvements. This includes the follow-up with employees to ensure that required changes are being made. The way it works is as follows: Two day review with a review of each department plus extensive conversation with accounting department personnel. Review of findings, a priority list prepared, assignments of responsibility delegated for each change being implemented, a timeline set. Weekly phone calls with the system specialist to review progress to date including review of output. Conversations with management to fine tune existing or new reports required. Check up with personnel involved to determine that they are now more efficient in their work and have better timely information on which to make decisions. Have all C-level management sit in on this review process and supply the buy-in to motivate employees. After sitting in on a few of sessions I was amazed at how many times a piece of paper with picked before the accounting was finalized, how many different people were looking at the same type of transactions with each one recording the transactions a different way, how long it takes to get departments to supply timely information for the month-end close, with the biggest revelation being how much of this required data output could be automated in the system thus eliminating many of the current processes being followed. I was also impressed by the response from employees once they learned they could use the system more effectively and spend more time on what is important. I guess the bottom line here is that if you get data from the computer to generate reports or supply answers……that process can be automated to generate and distribute those reports without someone digging into the data every day, week or month. So what will this cost you….maybe $3000 for the initial two-day review. Then $500 a week for follow up that will be more concentrated in the beginning of the process and disappear as the transition is finalized. A VERY MODEST INVESTMENT compared to having employees waste time because of inefficient processes, employees able to devote more time to running business and in the end reducing the need for additional admin or accounting help. The boss will love this. The accounting department will love this. The department heads will love this and your auditors will love this. So to assess where you stand answer these questions: Are you closing your books within 7 days after the month end? Are your cash balances and bank reconciliations supplied automatically by the system? Are management reports generated and distributed by the system? Are you mailing out invoices and statements every month? Are use of credit cards creating havoc in the accounting department? Is payroll automatically transferred from the payroll service into your system? Are work orders properly accounted for each day and closed out timely every day? You can add your own problems to this list. Whether owners are sticking around for the long haul or preparing to exit, this review process will make your company more valuable and flexible to deal with what is coming down the road. It will be worth your time to investigate this program for your company. Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail editorial @mhwmag.com to contact Garry.

The post Spend a little – make a lot appeared first on Material Handling Wholesaler.

Changes coming to your rental business

Thu, 27 Jul 2017 05:00:00 +0000

The staff of MHW informed me that the topic of the month is “Rental and Leasing.” A topic subject to MANY changes in the near future. Right now I am thinking about where to start, but start I must so here we go. These comments do not appear in any particular order. Each management team will need to prioritize them as they see fit. Tax changes They will be upon us before the end of the year. If we are lucky they will revert back to January 1, 2017. I hope that happens since it appears a lot of customers are waiting to invest until they know what the tax consequences will be. If they are lucky they will be able to buy and take delivery on December 31, 2017 and get a 100% write off in the process. You can write off 100% to some extent currently but have restrictions once you hit the dollar volume associated with Section 179 write offs. On the down side your tax deductions may not be worth as much if rates are lowered to 15-20%. That goes the same for any carryovers you may use after the law is passed. There is the question how pass-through entities would be taxed if the corporate rate is reduced to 20%. The logic I have heard says owners of pass-through entities will have the same rate available on income over and above a reasonable salary. So you pay personal rates on the salary but get 20% on any remaining so-called corporate earnings. I believe that tax reform will provide you other opportunities or headaches as well. We will have to see what they come up with. Accounting changes Leases will be accounted for differently starting in 2019. But all current leases in effect at that time (which may include some of your current agreements) will be subject to the new rules. The new rules will require lessees to record both a right-to-use asset and the full lease liability, both for basically the same amount. The fly in the ointment for lift truck dealers is that lessees will have the option of recording the entire liability including maintenance or account the maintenance separately. I guess that means they will be asking you for the breakdown regarding the maintenance portion, which may or may not be a good thing. They tell us the banks will most likely ignore this new pile of debt on your balance sheet and on customer balance sheets. Me, I don’t believe that. The new rules don’t affect much else in terms of financial metrics but will certainly change your debt/equity ratios. So I believe you can expect requests to help figure out how to avoid this problem, but that will be tough to do if they sign a four-five year lease with maintenance. IoT is here to stay Successful equipment dealers listen to their customers to improve customer satisfaction and retention, and in the process come up with new sources of revenue. OEM’s now offer remote monitoring and analytics services on a subscription basis that identify an issue before it creates a down situation. This service is offered to both dealers and end-users, with a result of increased revenues for the dealer while improving customer satisfaction and retention because this new service helps avoid costly repairs and downtime. Another advantage of this remote monitoring program is that the complexity of the system will make working on these units almost impossible without the proper tools, keeping the service business in your company and out of the hands of the general purpose tech. Digital dispatch of rental units as well as technician services are in full vogue. Soon you will have VR or IR available for techs in the field to help them complete a task properly the first time. Product-as-a-service and predictive maintenance programs are also being discussed to reduce rental costs and incentivize service levels that strive for max uptime. What customer do you know that would not like both reduced costs and improved efficiency? Probably a very short list. Lifecycle costs Want to improve your rental ROI? Then increase the number of years you keep rental units in the fleet. Many public rental companies have extended the life of units in the fleet by three years and seeing a 30% increase in ROI. I know this causes issues with your OEM, but the benefits are there because the rental units of today are of a higher quality which can be properly maintained without causing lost profits. Some companies with proper facilities and tech strength are even extending units further beyond the initial three-year term by refurbishing or rebuilding the unit and adding another four-five years to the useful life. Fix them up, paint them, and they look pretty good. OEM’s are even starting to offer this product for a substantial discount against the new price. Want to see you Balance Sheet improve….try not buying new units for your rental fleet…..keep units in the fleet three years longer……refurbish the units and get another four-five years or rental revenue without any note payment associated with that unit. Believe me, it works. Miscellaneous As I was sifting through the Ashlead Group annual report for the year that ended April 30, 2017, I noticed a chart which projects that the top 100 rental companies will have between 65-70% of the rental market by 2020. They had 34% in 2010. I take this to mean they can increase market share by buying up the competition as well as taking more market share because they have better programs to offer customers. Watch your back! I have mentioned Winsby a few times in this column, but I have to update you about their program. I happened to sit through a demo of what they can do and after three hours of discussion I was more amazed of what they can do then I was before. I guess my point is if you sit through a short demo you

The post Changes coming to your rental business appeared first on Material Handling Wholesaler.

Educated staff = more $$

Tue, 20 Jun 2017 05:00:00 +0000

If I had to bet on the title of this column I suspect I would win at least 90% of the time. What do you think? Why do I suggest that spending more time and dollars on training and education will generate more dollars to either the top line or bottom line or both? It is because: 70% of employers trying to fill open positions say they cannot find qualified candidates. Compared to other major economies the US only spends 20% of what they do on training. In your industry it is common to find department managers behind the curve when it comes to maximizing profits from the use of the latest technology. Recent Forbes articles explain how much training matters and used examples of how sharing company financials leads to better performance and profits. We are facing a period of rapid change related to IofT making it almost impossible for current employees to keep up. Falling behind on training and the use of technology is a sure way to deplete the value of your company. 30 million boomers will be retiring by 2020 taking all their experience with them. Add some of your own. The three issues that cause the biggest concerns are: The scale and timing of the changes taking place The continual creation of new Iof T applications Losing Boomer experience What this all means is that if you plan to upgrade your company to the use of the latest technology you best GET STARTED NOW, MAKE IT AN INTEGRAL PART OF YOUR ANNUAL BUSINESS PLAN AND CONTINUALLY REVIEW UPGRADES OR NEW SOLUTIONS AS NECESSARY TO KEEP YOU AT THE FRONT OF THE PACK. Sounds a bit daunting to me. Needs a top down approach. Will require an internal team to manage the process. Has to be implemented within the allotted timeframe. May take some bucks to make happen. Where would you start? Good question, but I believe I would want to survey people in the industry to see what they are doing and how it is working. I guess I would: Contact my OEM’s …to find out what they are seeing out there and who is doing it. I would contact MHEDA and ask the same question, and at the same time find out what changes they are making in their training offerings that may be of interest. I would consider joining a performance group because participants in these groups are most likely the ones who will know what new technology is providing results based on conversations with their performance group peers. Then I would duplicate these steps in related industries, such as construction equipment, heavy duty trucks and other service related entities. I would search the internet for courses or training materials that might be helpful to your particular needs. I would hire Millennial’s who could help formulate a tech-savvy program. I would get Six Sigma Lean data and see how that could be applied to your business. The goal here is to upgrade current employees and introduce them to the latest technology. To have a training program available for new hires covering all departments. To provide adequate departmental metrics to department employees and encourage their feedback to improve the process and operating results. And finally, to annually update the current program and make changes as necessary to keep your team at a reasonable competitive level. Not only do you have on-line training programs for every department in your company, you also have group sessions sponsored by MHEDA or some other industry organization. Coaches are also available to help manage both the parts and service and rental departments. The point here is that the training materials are there for the taking along with coaches who can assist with implementation. It will be up to management to monitor the process to make sure that the training courses are completed and that managers are buying in to the new techniques being displayed. Most dealers need people. Sales people that can get the job done. Parts personnel who know how to handle customers both internal and external. Service techs who can proceed up the ladder as soon as possible. Having training programs for each new hire geared to their department will go a long way to making that employee both efficient and confident that he/she can get the job done. There is NO doubt that training for existing as well as new employees is a must. You can either wait to find that perfect candidate or have a training curriculum available to put the best player you’ve found to work as soon as possible. You may be at the forefront of change today, but don’t look back because the future is creeping up at you at a very rapid pace. Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail editorial@mhwmag.com to contact Garry.

The post Educated staff = more $$ appeared first on Material Handling Wholesaler.

Sometimes it’s the simple stuff

Fri, 19 May 2017 05:00:00 +0000

You hear this many times over, maybe in different terms, but it is always there when it comes to hitting the performance numbers you are looking for. And that statement would be…..the devil is in the details. You hear it or see it many times over. You hear it during webinars or training sessions. You see it in the annual MHEDA Disc Report where you have hi-profit dealers and typical dealers. And when you compare where you stand compared to the hi-profit crowd, there are only a few line items that make the difference between being hi-profit, typical or worse. Let me give you an example… I work with Currie Management with some of their Performance Groups (15-plus dealers who meet two to three times per year) to compare notes and work on ways to improve their performance going forward. As part of this process, Currie provides a financial model and composite for each member of the group which contains their individual data compared to their model as well as the other members in the group. Participates are allowed to compare notes and discuss differences in operating results, as well as new ideas to make both perform at a higher level, which in turn means that most if not all members should be improving some facet of their operation after each meeting. The difference between this group and others I am familiar with is, Currie gives each member of the group a “Financial Model” based on their individual sales mix. Consequently, each member’s model could be different from all the others, which is likely depending on a sales mix made up of new sales, used sales, short-term rental, long-term rental with maintenance, parts sales, service sales and other key sales components such as warehouse system, etc. As you probably know, each segment of your sales mix produces a different level of profitability, which in turn must cover your fixed and variable operating expenses below the gross profit line, and generate a profit before tax that will take care of debt service and an appropriate ROA. So you can imagine what happens the first time a CEO member comes back from one of these meetings, with the “model” that Currie offered up, and shares it with department heads. “Impossible” is what you hear most often, “Our business is different,” is another…”He’s crazy” also shows up quite a bit. In short, a high percentage of department heads cannot imagine getting even close to the model. But then a miracle happens and the historical trend lines start moving in the right direction. Meeting participants discuss how their attempts to hit the model numbers are working out, what works and what doesn’t…describe each step in the right direction and how it was accomplished…and after numerous meetings and discussions, along with the financial composites which reflect actual results against the model, you start to see changes moving the needle toward the model and higher performance. Believe me it has been a fascinating experience to see these changes become a reality. And, for those having a tough time convincing department heads that the model is reasonable and attainable, a visit from Mr. Currie himself, meeting with each department head, usually gets the process moving in the right direction. It may take more than one meeting, but the results have proven to be worth the time and effort. I mention this program because what the results really develop from is attention to the details and diving into the weeds to get down to the makeup of basic transactions. With this higher level of understanding, changes are easier to make and understand and lead to more efficient, profitable operations. I can’t tell you how many times we have discussed the parts or service departments and demonstrated how a change here or there produces a move towards the financial model. And once we get dealers performing for the most part according to the model, we find that the difference between getting results beyond the model are almost 100% related to expense control. In other words, the top 25 dealers in one survey are all very close to “model” performance in terms of sales mix and gross margin percentage. But some in this group produce a PBT 15% higher than their peers…and after reviewing the financials…that increase results from better operating expense control, staying on top of costs and using technology to reduce cost. I have no doubts that any dealer who participates in a program that I have described will better understand his numbers and be in a position to deal with department heads at their level. In addition, having model goals and accountability will move the needle towards both greater performance and shareholder value. Any dealer getting ready to transition out should get ready by participating in a performance group which will help increase sales proceeds when the time comes to exit the company. Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail editorial@mhwmag.com to contact Garry.

The post Sometimes it’s the simple stuff appeared first on Material Handling Wholesaler.

Huddle up for ROI

Thu, 30 Mar 2017 05:00:00 +0000

I don’t know about you but I believe that every issue of MHW supplies dealers with a substantial amount of “profit or ROI enhancing ideas” each and every month. I would hope that you take the time to read and pass around the monthly columns supplied by David Baiocchi, Yours Truly, Art Sobzcak, Eileen Schmidt and other freelance writers that provide industry specific content. For example, in the February 2017 issue Mary Glindinning’s contribution about how technology is developing to streamline warehouses indicates what is coming down the pike in short order. Self-driving vehicle technology (in lift trucks) will become a necessity for customers looking to do more with less, capture data to better manage their warehouse operation, create a safer work environment and of course increase ROI. As indicated in Mary’s article implementing OTTO provides a return on investment that covers the cost in integrating the system in a 12-18 month timeframe, which is very cost effective. Think about this for one minute. How will this one change or impact your business? I can think of at least four-five issues that will take your time and money to properly deal with. How many do you come up with? Like to hear what your list contains. If you get a chance send your list to gbartecki@comcast.net and I will share them with our readers next month. Topics such as how the IoT will impact the material handling business, as indicated in Mary’s article, along with other financial, operations and marketing concepts that work will be the focus of the up and coming MHW Huddle taking place on June 7th in Rolling Meadows, Ill. The program is open for all C-level dealer employees and especially COO’s CFO’s, sales managers and service personnel. There will be meaningful programs for all that attend at a very attractive price compared to other venues. Being 15 minutes from O’Hare makes it even better. From my perspective I ask attendees to send me topics they want covered which can range from dealer valuations, financing, accounting issues they are having with their accountants or banks, cash flow issues, how the IoT will impact cash flow, the new tax rules (which we should have a handle on by then), inter-department issues calculating departmental profits and just about any other topic I have covered in these columns in the past. Get me the question and I will get you some solutions to consider. In terms of specific topics, I will spend some time on the new lease accounting rules because most leases entered into today will fall under the new lease rules coming on board in 2108-19. I am concerned about this because your major, large customers will be the ones affected by the changes and may be looking to you to help them out when it comes to structuring leases that provide more favorable financial results. Getting a handle on this now may help with that process. I am also hoping that by June 7 we will have a list of the likely tax changes you will have to implement so that we can discuss them in terms of 2017 impact as well as years going forward. This is sure to be a complicated topic but we will zero in on what is important in terms of dealer cash flow and customer cash flow as well. I will have my long-term dealer tax expert (Steve Pierson) at my side when we discuss this topic. And, of course, if you have any specific tax issues Steve can address please let me know what they are so I can give him a heads-up on what to prep for. I see that David plans to cover aftermarket issues as well as sales training in this new environment we are entering. Please check the conference details for the specific topics he will cover. And I am sure I can suggest you contact David with topics you would like him to cover. I see that Debbie Frakes of Winsby will be there to inform you about very cost effective methods to market your company, keep customer contact information current, upgrade your goggle scores, and track actual customer activity to assist sales management and sales personnel generate more leads for new business. I have mentioned Winsby before and based on talking to dealers that use their services …it works. All in all, you have to admit that this MHW Huddle program has the ability to help dealers increase sales, lower costs and put more cash in their bank account. It will also inform dealers what steps they will need to take to deal with the industry changes that will surely change customer needs and what they expect from their lift truck provider. So send me your questions or topics for discussion and plan to attend MHW’s Huddle June 7 in Chicago. Looking forward to seeing your there. Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail editorial@mhwmag.com to contact Garry.

The post Huddle up for ROI appeared first on Material Handling Wholesaler.

Looking forward

Mon, 20 Mar 2017 05:00:00 +0000

I don’t know about you but I find today’s financial markets quite confusing, which makes it the tougher trying to plan for the future. Quite frankly, I still suggest keeping planning strategies close to the vest because the “markets” could move either way for any number of reasons and thus impact your business either way. How quickly things change today has me shortening up the planning process into quarters, not years. I suggest that dealers should prepare a preliminary annual plan, but then spend more time on a detailed plan for next quarter, thus providing more flexibility to make changes as necessary. Not only is this quarterly process more flexible, it also forces you to take a hard look at the upcoming three months, probably a lot harder than you would have if you only have an annual plan. As an example of what is going on, let me relate an experience I recently had with a banker representing one of the major banks financing construction and material handling equipment. This banker attended the AED convention in January and said that he was booked solid for three full days and that every person he saw was very upbeat and enthusiastic. With 25 years’ experience in the equipment finance business he said he never experienced anything like it. Taking this a step further I would suggest this same exuberance shall carry over into the material handling business if, in fact, manufacturing is brought back to this country along with upgrades being made in the distribution/warehousing business. All in all a lot of people are expecting growth in 2017-18. That’s a good thing. Speaking of confusing, the talk about tax changes are enough to drive you to drink. Even the most experienced tax people I work with are shaking their heads about how all of this will work. Companies will still be required to report using GAAP, but it appears for tax purposes companies will be more on a cash basis (when you pay for it you write it off and when you collect it you it record as income). Keeping that in mind in the next paragraph they say LIFO will be retained, which is hard to understand if you write off your purchases when you buy them. In other words, this is no inventory to attach LIFO to. If you think what I just covered is confusing, just think about the border or territory tax. If you bring items in from out of the country to sell in the US you pay tax on it. If you send goods out of the country you don’t pay tax on them. Many dealers may not be directly involved with international trade but what about your customers and suppliers. How will this impact your business….something to think about. Add in talk about interest rate hikes, which are sure to come, and their impact on the dollar and we could be right back where we started since a stronger dollar will make imports cheaper and exports more expensive. Isn’t that just the opposite of the border tax impact discussed in the previous paragraph…..more to think about. And, as I mentioned in a previous column, many companies in the equipment distribution and rental business are taking steps to extend the useful life of their assets which in turn reduces Cap X purchases and softens any interest rate hike while increasing cash flow. If you didn’t see that column you can look up last month’s column on MHW’s website and look it over. As usual, comments are appreciated. After thinking about all these events scheduled to take place sometime in 2017, I go back to reaffirm my suggestion about adopting a quarterly planning process because as of today there are too many balls in the air to contend with to only have one plan that is probably 10 months old. One more thing for this month. As I was reviewing my accounting publications I came across an article titled “Figuring out transfer pricing: How to set terms of negotiation between departments.” Sounded kind of interesting even though transfer pricing usually has to do with tax planning… pushing profits to low tax environments. But in this case the discussion covered more than taxes by discussing the competing interests in the same company which if not balanced properly can have a negative impact on the company as a whole. I don’t know about you but this certainly sounds like every lift truck dealer I know where the parts and service departments sell to the sales and rental departments. So, what did we learn from the article: We know that department heads are often compensated based on departmental profit. Thus, we understand there is a conflict of interest regarding internal charges. And if pricing agreements can’t be put in place, it is possible the results may not be good for the business as a whole. Management has to be able to convince department heads that they can determine performance levels even if internal pricing is distorted. Management needs to explain reasoning for distorting internal pricing and basically get “buy-in” from the department head. Costing conflicts can be resolved by comparing the market price versus the internal price. When it comes down to labor and parts pricing it should be somewhat easy to determine the true cost and rate to use for best customers (which are basically your sales and rental departments). When part of a department head’s compensation is based on firm-level performance there may be a greater alignment between the department head and the company. Food for thought. Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail editorial@mhwmag.com to contact Garry.

The post Looking forward appeared first on Material Handling Wholesaler.

The future is NOW!

Fri, 20 Jan 2017 06:00:00 +0000

I have to quit reading all these publications I receive on the various email accounts I have open. They keep giving me crazy ideas how to make more money in this industry, but at the same time disrupt the status quo. For example, I am looking at an article that appeared in Equipment World… and I am telling myself that I am looking at the future of most of the equipment industry. Let me show you the headline for the article I am reading: Texas shop remanufactures pickups in under 48 hours, sells them for half price. Wow… I say… are they kidding me? And I look again at a picture of a nice looking F150 and say what will that sell for ….$20,000- $25,000? If so, quite a deal, especially when you receive a three-year, 75,000-mile warranty as part of the deal. The rebuild includes rebuilt engine, transmission, drivetrain and any necessary interior and body work. The article does not spell out if a core is required or how they get the trucks they rebuild. The company name is Vehicle Reman and the website is www.vehiclereman.com. So the obvious question is… if we can do this for F150’s… why can’t we do it for lift trucks? And the answer is… we can and probably in line with a similar timetable to the F150 rebuild. Where I work in the rental industry we have been refurbishing (not remanufacturing) units for about 30-60 hours that adds another four or five years of time utilization to a rental unit. All I would need to do is basically replace the engine with a rebuilt engine and I am pretty close to the F150 model. So, if you were a customer would you look at a remanufactured unit for a 40-50% discount? I think many would be willing to give it a try, which is why I believe this extended-life equipment scenario is going to disrupt the standard OEM/dealer supply chain as we know it today. Should this disruption continue, fewer new units will be required to the extent that many OEM’s would have their supply chain materially disrupted. OEM’s would do great selling parts, but still require a reduction in fixed cost to cover their current financial commitments. The used equipment market would firm up because you would have rebuilders looking for core units to remanufacture. If they are dealers they would have attractive parts pricing which will help offset the loss of gross profit margins from selling new units. Who knows, OEM’s may have to compete in this business themselves and most likely compete against their own dealer network. So far this sounds very feasible… if not for the appraisal and financing aspects of the transactions. This probably requires a new category within the used equipment sector so that these remanufactured units receive a reasonable valuation in terms of their extended useful life. I imagine a buyer would have a file supporting all the work done to the unit, along with the cost of the remanufactured unit being purchased, that supports the expected time utilization similar to what a new unit would deliver. All we have to do now is convince a bank or appraiser that we have a transaction that supports financing similar to what a customer would get when financing a new unit (similar being the key word). The loan terms may not exactly duplicate new unit terms but should be close, with residuals being another key issue to deal with until a history of these remanufactured units is established. In any event, both banks and appraisers will have a hard time trying to segregate remanufactured units into a new category for reporting and analysis purposes. Dealers with the capacity to manage their shop to do this type of work should find it quite profitable compared to new unit margins. OEM’s would need to adopt their supply chain to one with fewer new sales but higher parts sales, which may work out ok since parts sales are quite profitable for OEM’s. And, it is entirely possible that lift truck rental units (as opposed to customer owned units) could make up for missed sales opportunities. Take a look at that crystal ball in front of you and tell me what you see. Do you see your dealership getting more into rental units, refurbished units and possibly remanufactured units? I see equipment costs going higher and higher each year with customers looking for cheaper solutions to what they have now. Look closer, you may see yourself being a remanufactured unit OEM. Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail editorial@mhwmag.com to contact Garry. Garry Bartecki will be a featured speaker at the upcoming MHhuddle one-day material handling conference. Learn more…

The post The future is NOW! appeared first on Material Handling Wholesaler.

Close it and plan it

Sun, 20 Nov 2016 06:00:00 +0000

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 editorial@mhwmag.com to contact Garry.

The post Close it and plan it appeared first on Material Handling Wholesaler.

Make it simple

Fri, 21 Oct 2016 05:00:00 +0000

The last couple columns have centered around technology and ways to improve productivity, and thus profits and shareholder value. There is little doubt that you could improve operations if you took the time to analyze what you are doing, and what is available already in the marketplace to help implement the changes. We covered digital tools to support and improve field service in terms of first-time-fix rates, technician utilization, increased productivity, revenue enhancements and customer satisfaction. Considering the importance of your aftermarket presence adopting these tools is imperative if you hope to just maintain or grow market share. We also covered what telematics have to offer. Telematics provide a perfect fit with the field service tools mentioned above and really kick up your service levels a notch or two. Many dealers are moving into this area and will have the ability to monitor user fleets as well as provide data regarding both short-term and long-term rental units. Again, if you are not at least investigating this option at this time you will find yourself behind the eight ball. Both of these topics are covered at AEMP meetings and through their training programs. I encourage lift truck dealers to investigate having an employee get “certified” by AEMP to be a professional equipment manager. This knowledge could be used to consult with customers to help manage their fleet needs. Customers will continue to find ways to reduce cost and become more efficient. Vendors who help them do that will be at the top of their call list. Fall behind and your risk of losing long-term customers increases significantly. I had an opportunity recently to meet with a group of dealer CFO’s to discuss data management and other industry topics. Great group that provided many useful suggestions on how to do their jobs better. By “better” I mean how do I get rid of compliance issues so I can spend more time on the business. One item that popped out from the meeting is that all but one of the CFO’s are on a five-day-close cycle. When I explored further, the key to this timing was getting rid of spreadsheets and getting all data properly recorded in the system. Get it done right the first time and save time. Getting rid of HR issues was also high the list. When you are in charge of hiring, training, reviewing, benefits, compliance and all other employee related issues, HR can become a full-time job for the CFO and probably one other person as well. It is expensive to have employees over and above the payroll cost. To make matters even worse, there were about 35 employment laws and regulations to deal with in 1980, and now that number is about 100 employment laws and regulations to content with, making it almost impossible to not be in violation of something. More reasons to try and simplify the HR process, and believe it or not very doable with the latest version of a PEO. To get up to speed on PEO’s I interviewed Chris Zdunich of TriNet. chris.zdunich@trinet.com if you have questions. A PEO will serve as an outsourced HR department providing comprehensive employment services such as payroll, benefits administration, HR management and employer compliance. The PEO partners with you to help attract talent, contain rising HR costs, create efficiency and minimize risk exposure. PEO’ s enter into a shared employment relationship with your company, become the employer of record and is responsible for payroll compliance, workmen’s compensation insurance, unemployment claims and other HR functions. Your company retains control and direction of employees. With the total employee pool PEO’s are able to better negotiate costs associated with HR, including Workmen’s Compensation Insurance. Payroll checks or deposits are made on company checks but use the PEO Federal ID number. In short, PEO’s are responsible for the 100 or so employment laws and regulations referred to earlier. Negatives associated with PEO’s seem to be related to company control and company culture. But since the only difference regarding payroll is the ID number, there should not be much of an issue. In terms of culture, your company is involved in the HR process keeping in mind the 100 employment regulations and laws which no longer give an employer much leeway in how to handle HR matters. On the other hand, PEO’s are familiar with just about every employee related issue you can think of. In addition, PEO’s have a direct interest in employee safety issues. In the end, employees have state of the art payroll services and benefit administration which may be better then what they currently have. A PEO will free up the CFO and most of the time of one other person, leaving the CFO to concentrate on more “profitable” issues. The PEO cost is usually 2-3% of payroll before taking into account any reduction in insurance cost or internal payroll cost currently consumed with HR matters. There should not be any increase in cost, but a more efficient HR function that benefits both the company and employees. These are some ways to keep it simple so you can concentrate on making more money. In today’s environment almost every business activity can be completed in less time if you put your mind to it and ask a millennial to see if they can speed up the process. Keep it simple and profit from it. Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail editorial@mhwmag.com to contact Garry.

The post Make it simple appeared first on Material Handling Wholesaler.