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Managing your business in tough times
Kristoffer Pascual
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Managing your business in tough times
The economy is putting a strain on businesses in Hawaii and across the nation. However, there are a number of steps you can take help your company weather rough economic times.
» Secure your cash: Critically evaluate the strength of your primary banks. Further, maintain cash balances at multiple banks within FDIC-insured limits where possible. For cash held in short-term investments, reassess the safety and liquidity of those cash equivalents.
» Maximize depreciation of plant, property, and equipment: Consider a capital cost recovery review (cost-segregation study) to ensure that plant, property and equipment are being depreciated at the fastest possible rate. In addition, if the value of your real estate assets has been impaired, don't ignore the potential impact on financial statements or chances to seek property tax relief due to lower values.
» Address liquidity issues: Given the current credit crunch, get ahead of the curve. Review capital requirements and bank covenants to prepare for credit line issues. If possible, negotiate a larger credit line to provide a cushion. Request waivers for any covenants that are expected to be violated or renegotiate them. Consider taking advantage of lower interest rates by refinancing debt.
» Be creative with capital opportunities: Consider accessing capital through a private equity firm. It is a good idea to reach out to alternative financing sources before you absolutely need them.
» Offer incentives and leasing solutions to address declining occupancies: For real estate developers with declining occupancies, consider enhancing occupancies and revenue through new incentives, leasing solutions and packages attractive to tenants. Benchmark the incentives being offered by comparable firms.
» Manage your payroll while retaining key people: Take steps to reduce health care costs and manage payroll and benefits expenses, such as restructuring your workforce and hours to minimize benefits expenses while remaining competitive.
Other ideas include exploring health and wellness programs to limit increases in health care expenses, and the adoption of health savings accounts.
Now is also a good time to re-evaluate funding levels for benefits programs to ensure they are funded at appropriate, but not excessive, levels.
In addition, you might want to consider outsourcing appropriate functions to reduce costs and increase efficiency.
At the same time, be aggressive about keeping your best people and remaining their employer-of-choice. It is always less expensive to keep your top employees happy than to find and train replacements for them.
» Manage your overall spending: Consider retrenchment in spending and other ways to cut costs. Review all discretionary expenditures and identify those that can be deferred or reduced.
Companies should evaluate opportunities under the new stimulus packages that include bonus depreciation for many types of capital investment and temporarily increased section 179 deductions under the federal tax code.