Now Is the Time - On The Numbers
Construction Equipment Distribution magazine is published by the Associated Equipment Distributors, a nonprofit trade association founded in 1919, whose membership is primarily comprised of the leading equipment dealerships and rental companies in the U.S. and Canada. AED membership also includes equipment manufacturers and industry-service firms. CED magazine has been published continuously since 1920. Associated Equipment Distributors
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SECTION: On The Numbers

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Now Is the Time

Written By: GARRY BARTECKI

Article Date: 02-01-2008
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.


Regardless of your annual sales volume, AED's Cost of Doing Business Report offers direct value tailored to your operation
and profitability.

If you ever had a need to better understand your business, this may be the year. And to help facilitate the solution to this need, this may be the first year your company participates in AED's Cost of Doing Business Report.

It does not matter whether your business is in the $5 million dollar range or the $300 million dollar range - there is information in this report to help you run your business and improve operating performance. In addition, AED has financial planning tools to help you convert your strategic thinking or budget into a real operating document.

Dealers generating $25 million or less in revenues normally receive significant value from the CODB report. It provides insight to all dealers, but is most important to dealers lacking a full complement of financial expertise.

We have heard that the CODB survey takes too long to complete and that year-end data is not available to complete the report. In reality, the report survey takes two to three hours to prepare. The survey does not require a CPA to prepare it, and those who participate receive a special report that compares their company data to industry averages with suggestions to improve operating results.

AED even offers assistance to map your financial statements to the CODB survey, which allows annual participation with minimum prep time. With a due date to complete the survey of March 31, many dealers use their preliminary results even if their accountants have not completed making year-end adjustments.

Another neat thing about CODB is the Asset Management section, which helps manage the balance sheet. Believe it or not, the dealer business is an Asset Management Business. Let the balance sheet get out of control and your cash to run the business gets soaked up in receivables or inventory - and all of a sudden you cannot pay your bills nor get additional credit. Days sales outstanding, receivable turns, asset turns, utilization rates and Return on Assets are all detailed in the report, along with a comparison of your company against several benchmarking categories to help avoid overinvesting in various asset categories.

On the operating side, sales mix and gross profit margins are detailed. In addition, departmental benchmarking statistics are revealed in terms of sales per employee, service sales per mechanic, parts sales per parts employee and equipment sales per sales employee, along with additional ratios and analysis to help analyze your business in each revenue category.

On the operating expense side, expenses are divided into three categories: payroll costs, occupancy costs and general operating costs. Since controlling payroll cost is of prime importance in meeting profitability goals, having this information is invaluable when reviewing departmental operating results and budgets.

Participants receive their personal company analysis where every line item, ratio and worksheet is compared to your data, by size, location and type of equipment, along with a four year trend analysis.

AED also has various planning worksheets available to measure returns on assets and equity. These worksheets cover both the balance sheet and operating data, which are required to properly measure results, as mentioned previously. And to top it all off, AED is prepared to help you analyze the results.

In today's mysterious economic situation, dealer management needs to know they are budgeted properly and have the tools to analyze data and make corrections before it is too late. Participation in AED's CODB helps facilitate this process and should become a priority goal for management.

You will electronically receive your CODB survey within the next few weeks. Fill it out and return it by March 31. Use your preliminary numbers if you have to. It cannot take more than three hours to complete. If you need help, call me and we will assist as necessary. After you get your personal report back, study it and call me to discuss any issues that come to your attention - we are here to help!



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Article Categories:  Financial  »  Management