January 2015

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January 2015 | Construction Equipment Distribution | www.cedmag.com | 25 >> MONEY$$$MAN GARRY BARTECKI 2015 Will Be an Interesting Year In a tax deferral position? I'd start socking away cash for taxes now. I cannot believe the new year is upon us. Aer the last couple of years, I was hoping the horizon for 2015 would be more appar- ent, but it seems that will not be the case. e world economy keeps on turning, producing both good and poor results. Management folks, saddle up for another year of fun. Some of the areas that will need consider- ation are as follows: Rental Transactions. ose of you in the game, prepare for additional competition. ose not in the game, figure out what you are going to do. Tax Changes. e "Extenders" are in place for 2014 returns, which should make all of you happy. ose with big tax deferrals, get ready for the accelerated reversals we are anticipating. Telematics. is is going to change the industry and benefit all parties concerned: OEMs, dealers, and customers. You should be able to drive new business opportunities if you master the telematics scene. Costs. Pressure to increase wages. Health- care costs to be figured out. ey keep telling us inflation is under control, but all costs keep on increasing for every line item on our budget. Can we pass these on? Do we need to take steps to improve efficiency to keep costs in line? Calculate the impact on Gross Profit and Profit Before Tax and make necessary adjustments. Oil. I know you were thinking about this as you read the previous paragraph. I didn't forget. Oil prices can generate both positive and negative outcomes. It can lower your cost of sales for delivery, freight cost, and cost to operate all equipment. On the other hand, it can reduce fuel charges and reduce business from some of your biggest custom- ers if you are lucky enough to be located in an energy field. Interest Rates. One day they are increasing, the next they are not. Bank credit is tight but will loosen up – but then again, maybe not. Probably a toss-up, but not one to be ignored. If you are expecting business growth, better make sure your bank will support you. Also, check those bank covenants quarterly, especially if you anticipate changes to your bottom line. I prepared this list in order of importance. My choice of Rental as No. 1 and Tax as No. 2 could probably go either way. I say that because the cash requirements could be overwhelming for those with material tax deferrals – this is due to changes on LIFO, LKE and Bonus Depreciation. In any event, you better know what is going on tax-wise because of "Tax Reform." If I found myself in a tax deferral position I would start putting some bucks aside in a contingent fund. Be sure to hear a live update at Summit on Feb. 11 with AED's Christian Klein, Ron Hodgeman from WTP, and Rex Collins from Somerset CPAs. In short, plan. And run your business to make money. Better yet, run it to generate free cash flow. CODB Heads-Up I also want to notify you of upcoming changes to the 2015 CODB report covering 2014 activity. We added some self-explanatory questions to deal with employee productivity, rental transactions, and the tax structure you use for operating your company. is will provide AED with additional knowledge in three important areas for dealers. ese new questions will appear in the CODB Survey, which is either sent out to you or you can get it from AED's website, aednet.org. Last year's CODB produced some very interesting results, since the size of the "Typi- cal Dealer" and the "High-Profit Dealer" were basically the same. is result made it quite easy to see why and how results are different for both categories. Peer knowledge is a must in this environ- ment. If you have not participated in AED's CODB, it is time to take advantage of this free service provided to members. e report and a customized analysis are yours when you complete the survey. Watch for it in February. n GARRY BARTECKI (gbartecki@comcast.net), founder of Dealer-Rental Success LLC, is a financial consultant to the equipment industry. He can be reached at 708-347-9109. If you have not participated in AED's CODB, it is time to take advantage of this free service provided to members.

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