AAF NEWS FLASH

During tough times, it’s important to stay ahead of the curve. The recent crisis is just a reminder of the importance and benefits of having a sound tax plan and business strategy that you can use to navigate through turbulent times. Below are some tips to help you assess your current financial condition and start re-thinking your business plan to face the current economic challenges. Don’t hesitate to contact AAF for objective tax consulting guidance in helping you make intelligent financial decisions.

1. To get a better sense of where you stand, begin by reviewing your cash position and anticipated cash needs. Are they in line with your business’s short-term needs, goals and risk tolerance?
2. Take a fresh look at your monthly income and expenses. Have you been meeting your budgeted projections? How much of a drop in revenues can your business withstand and for how long?
3. Check with your lenders on the status of your credit lines. Are you in compliance with their terms? Will your bank renew their commitments at similar amounts, rates and terms?
4. Eliminate your reliance on credit by disciplining your spending.
5. Refocus on your balance sheet and how much credit you are extending to your customers.
6. If your credit lines are frozen or at their maximum limits, consider meeting with vendors and working out a schedule of partial payments that would allow continued delivery of critical materials and supplies.
7. Look into alternative types of financing. Some to be considered are loans on life insurance policies, local development agencies or the U.S. Small Business Administration.
8. Keep an eye on your accounts receivable. Keep receivables aging current at all times.
9. Manage accounts payable more closely. Forfeiting early pay discounts may be more advantageous in preserving cash that may be needed for critical items. Keep payables aging current at all times because that’s an important tool for managing cash.
10. Analyze your expenses and determine which ones can be controlled. Are there opportunities to reduce your on-hand inventory? Have you billed all your contractual items?
11. Consider ways to pass your increased costs (i.e., fuel expense) on to your customers.
12. Check the safety of any cash deposits you have. On October 3, 2008 the FDIC deposit insurance was temporarily raised from $100,000 to $250,000 per depositor through December 31, 2009. If you have more than $250,000 in any one bank, move the excess to another FDIC insured bank.
13. Don’t engage in panic selling of your investments. Make sure your portfolio is diversified and in accordance with your risk tolerance. Consider taking losses before the end of the year if you have capital gains.
14. Come up with a plan NOW to respond to future declines in revenues before they actually occur. Re-think your business strategies and update projections. Review your product/service lines to identify the most profitable items and determine how to leverage for future growth in profits.
15. Contact your good customers. Even casual discussions can lead to new business opportunities.
16. Review all your insurance coverage, particularly any from new companies with weak balance sheets. Be careful not to surrender a policy, as securing new coverage might require underwriting that can affect your coverage.
17. Calm your employees’ fears about how this crisis will affect the company, their jobs and their retirement or other benefit plans. Speculation and gossip are counterproductive, so it’s better to address their concerns directly.

We know and understand your business and the challenges you face. Contact AAF for tax consulting services to take advantage of current tax law which will likely change with the new administration. We can work with you to navigate these turbulent times.

Sincerely,

Your Friends at Alexander, Aronson, Finning & Co.

 

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You are receiving this information because you are a valued client or friend of AAF. Please contact Angela Balter by e-mail (abalter@aafcpa.com) or phone (508-366-9100) if you would prefer not to receive this publication.

Any tax advice contained in this e-mail was not intended or written by the practitioner to be used (and cannot be used) by the taxpayer to avoid penalties that may be imposed under the Internal Revenue Code or state or local tax law provisions