January 2013

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On the Numbers What Does Your Crystal Ball Say? Mine says, watch your cash more closely than ever. By Garry bartecki I am sure you all have one ��� a especially regarding customer financing. crystal ball that is. If it is not sitting n The insurance markets are about in the center of your desk it is rolling to harden. around in your brain trying to figure n All your tax bills will increase. out what the heck is going on and how n The union contracts still call for to plan for 2013 and beyond. annual raises. So, what���s the little crystal ball n The election results caused some telling you? issues regarding the energy business. n Do you expand? n It is still dangerous out there. n Do you retrench? n Cash is king ��� period. Don���t waste it. n Do you start repaying the pay cuts n Financial engineering is a must to you initiated three or four years ago? maintain or improve your business n Do you buy more inventory? value. n Do you make a more determined n The business environment is move into rental? changing faster and faster, and you n Do you change your system? are either finding ways to grow or n Do you put money aside for a higher you���ll fall behind. tax bill? n There���s money in fixing up and n Do you take on additional lines? selling all those hard-down pieces of n Do you try to refinance the business? inventory and retired rental units. n Do you put your business on n You have to find ways to leverage the block? your investments in business growth A lot of questions to deal with and initiatives. many more that aren���t even listed. So And here���s a short summary of how tell me, what did I miss? What is your to act on the above realities: biggest challenge right now as you see n Do not jeopardize your cash position. it? And what problems is this biggest n Understand your tax position challenge causing? I would like to know ��� for 2013. because in most cases we can help you n Make sure you have a bank that will deal with those challenges. stick with this industry. So let me tell you what my crystal ball is n Maximize profit by selling used telling me. equipment. n Inventory is aging. n Upgrade your personnel. n RPO contracts are not getting n Get closer to your customers. converted to sales. n Check benchmark data daily. n The rental business is still somewhat n Build and conserve cash. of a mystery. n Your balance sheet is developing Other Housekeeping Items problems. The IRS is once again looking into n Your bank does not understand ���dual-use property��� or your rent-to the rental business. sell transactions, and is requesting n The Tier-4 product is going to be comments about how to handle such a problem selling now and as used transactions. They obviously are asking equipment. if tax deprecation and LKE applies to n The banks have not been very helpful, these types of transactions, and if so, under what circumstances. I thought we went through this already, but here we go again. AED will keep a close eye on this issue and contribute comments after consulting with dealer and service members who deal with these types of transactions. If you have comments to add please send them along. I mentioned the new Tangible Property regulations in a previous column and the IRS has decided to delay the effective date to Jan. 1, 2014. These were initially effective Jan. 1, 2012. In case you forgot, these regs require new repair classification methods and even require certain costs to be capitalized for new equipment purchased, similar to the 263a regulations for inventory. You can implement for 2012 if you wish. As if you didn���t have enough to worry about, the FDIC unlimited guarantee on noninterest-bearing transaction bank accounts will have expired on Dec. 31, 2012. It���s back to only $250,000 being protected; for everything above that you are on your own. Banking experts expect many companies will move their funds around to compensate for these issues or just move funds to the larger banks. Time to discuss how to protect your bank balances with your banker if you have not already done so. I really want to hear what you believe is your biggest challenge and what problems that challenge is causing. I will compile the answers, keeping the names of respondents confidential. Also, I want to know what I left off your crystal ball list. See you in Las Vegas! Garry bartecki (gbartecki@ aednet.org) is AED���s vice president of Finance. January 2013 | Construction Equipment Distribution | www.cedmag.com | 69 69_On_the_Numbers_KP.indd 69 12/21/12 2:15 PM

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