Tight times mean that business managers must run a tight ship. Certified public accountant Barbara Barschak offers some money maneuvers.
Special Events Magazine: When times are tight and clients are slow in paying, what strategies should we take with receivables?
Barbara Barschak: Look at your retainer policy. If you take on a new client and you don't bill for a month, and they've got 30 days to pay you, you are already out 60 days. Also, be the squeaky wheel that gets the grease. If you've got a receivable out there, you get on the phone and you keep calling. You don't put them on the defensive, but you say, “Let's set up a payment plan. Can you pay me $100 a week?” Make them come up with the idea of what they're going to do; usually they will commit to it. If I were a small operator, I'd keep that receivable listing on my desk right by the phone and when I'm in a bad mood, I'd call my delinquent clients — because they can't make me feel any worse than I already do!
Q: What steps should we take with payables?
A: If you receive a bill with finance charges and you are willing to pay it off in full, don't be afraid to negotiate the finance charges out. Also, make sure that you don't have a credit balance on an account. This happens all the time. Read your billings and make sure they are correct.
Q: How should employee compensation be handled?
A: When times are tough, it's an employer's market. So people don't necessarily need to get pay increases — and they may even get a cutback. There may be people who want to work part-time; ask them. Review your employees' accrued vacation and sick time; is there too much of it? Also, look at your labor scheduling. Maybe that three-person job could be done by two people. Do your people come in on time? Do they take an hour and a half for their lunch hour? It's OK to be stricter now because people value their jobs. But don't let your labor force get too tight, because you want to be able to respond when the economy turns around.
Q: Many of our readers are self-employed professionals with erratic incomes; what strategies should they be using now?
A: No. 1: Make sure your credit line is intact. If you don't have one, get one. If you've got one, now's the time to see if you want to increase it. You make estimated tax payments, and those payments are typically based on prior-year income. If you're having a down quarter, discuss this with your tax preparer. Also, are you taking all of your deductions? If it's truly a business expense, don't be afraid to take it. Finally, pass your costs on to your clients. As your costs go up, you have to review what you are charging. And if you're doing something because you think it's good for you — such as giving you good visibility — rethink it. Have you really gotten any business from that event?
Q: Many of our readers are party rental operators who manage large inventories. What advice do you have for them?
A: If you have obsolete inventory, get rid of it, because you are paying personal property taxes on it. Otherwise, use your inventory. The easiest way to turn a profit is to use inventory that you've already spent money on.
Q: Any final advice?
A: You need to have good accounting records that you review in a timely manner. It doesn't do you any good to look at a financial statement three months from now. A good accountant will analyze your financials once a month and send you a quick note or talk to you about it. It doesn't take long.
Barbara Barschak, CPA, is a partner with Los Angeles-based accounting firm Katz Cassidy. She can be reached at 310/826-3539. Note: This article provides general information and is not a substitute for professional financial advice.
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