Planning Time Again - 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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Planning Time Again

By Garry Bartecki

Article Date: 11-01-2008
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.

Just when you'll need it most, a new management simulation program will head your way in spring of '09.

Another thrilling year goes by, and this year it was a thrilling year – good for some, bad for others. There’ll be more of the same conditions in 2009, but applying some solid planning scenarios could help you increase cash, cut expenses, and just help you avoid mistakes. What do you need to know to plan out 2009?
  • Expect interest rate hikes.
  • Expect tougher lending standards for you and your customers.
  • Expect tougher pricing demands from even your good customers.
  • Expect less demand for new units.
  • Expect price increases.
  • Expect slower collections and more credit risk overall.
  • There are very definite tax savings and refunds available.
  • Don’t expect a recovery in 2009.
At first glance, these 2009 expectations say one thing loud and clear: Control your inventory levels.
The other thing this list tells me is: Maximize your parts, service and rental opportunities.
Now that we have that out of the way, I’d like to offer some additional recommendations:
  • The bonus depreciation you get as part of the Economic Stimulus Plan does not have an AMT penalty associated with it. This is a big deal. Assuming the last three years have been good years means you have refundable balances awaiting you if you have a taxable loss this year. Run some estimates now to see if any adjustments are required before year-end.
  • It’s time to beef up your credit process because your customers will be having a tough time. You will have to make a business decision on who gets credit and you will have to monitor new sales and balances on a weekly basis. If there was ever a year to make this a priority, this will be it.
  • It’s time to get your payroll costs in line, including health care costs. The new HRA and HSA plans can help you do this. When you provide an incentive for employees to establish a savings account with the portion of the premiums they don’t spend they start shopping health care costs. Outsourcing not only lets you manage your payroll, it helps reduce the cost of benefits. There are specific rules you need to adhere to, but if you meet them you can save money.
  • Also, it’s time to watch out for employee fraud. Tough times require tough controls.
  • Believe it or not, there is not a single line item on your income statement that you can’t reduce by 10 percent.
These topics and many more were discussed at AED’s annual CFO Conference held in April and September this year. A new topic we raised was the new dealer simulation model and program AED will introduce next spring from PriSim. This model is so sophisticated and department-specific that your managers get the benefit of acquiring three to four years of hands-on experience in two days. Can you spare your department heads for two days? Those AED members – CEOs and CFOs alike – who have experienced the program, would agree that you can because of the direct experience you get from the program. Right now we are thinking of using a regional approach to reduce travel costs, and perhaps even making the training a competitive experience in which dealers could compete on a regional and national level. It is quite an experience!Now, imagine you have this simulation program on your office computer, which would allow you to plan to your heart’s content and bring in each department head individually or as a group to help decide how to allocate company resources. It would make your life a lot easier. The simulation programs are limited to 25 to 30 participants or five to six teams, and will require your immediate attention if you wish to send a team. The initial regions selected will be decided shortly with corresponding communications sent to C-level executives. In short, every new department manager should have to attend this course.
Please call me if you have any questions. And if you have a facility that will hold 25-30 people and you want to provide that site for a sim presentation, I would like to get you on the list for future consideration.

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