Business
Financial Resolutions for 2001
By Liese Hutchison
Personal New Year’s resolutions hang like an albatross throughout
the year. Lose weight, exercise more, eat healthier foods are
part of the yearly mantra. The advice isn’t bad; it’s just hard
to stick to.
What about resolutions for a company or organization? These
resolutions shouldn’t weigh heavily around the corporate neck
because they’re designed to improve the bottom line. Instead
of losing weight, the company could trim costs. Exercise more?
How about burning fat by reviewing employee compensation packages.
Eat healthier? Evaluate the company’s space to make sure it’s
meeting current needs.
Several area tax, audit and financial planning experts took
St. Louis Commerce Magazine’s challenge and developed numerous
financial resolutions for the coming year that any organization,
regardless of size, can follow.
Numerous recommendations came regarding reducing operating costs.
Al Kent, the St. Louis Assurance Leader for PricewaterhouseCoopers,
points out that organizations should carefully review telecommunications
costs and structure. He notes that with the proliferation of
long distance carriers and the various billing structures, most
companies that use any significant level of telecommunications
in their businesses are overpaying. “Specialists can be hired
at a fraction of the typical annual savings,” Kent states. He
says refunds are common.
Another area he recommends organizations review is electrical
power. “Assess whether purchasing electrical power in advance
makes sense. With deregulation of the electrical industry, it
is possible to purchase electricity for future delivery from
someone other than your local electrical provider. For large
producers this may be advantageous given the projected significant
rate hikes we can expect in the next year,” Kent remarks.
When it comes to office space, too much isn’t always a good
thing. “Carefully evaluate the usage of your real estate investments,
including leased space. If you are not using it on a very frequent
basis (for example if your employees travel to customers frequently),
consider “hoteling” concepts to maximize the utilization and
lower your overall real estate costs,” Kent says.
Taxes are always a hot button and sticking to these resolutions
offers numerous financial benefits. Alan King, a tax partner
with PricewaterhouseCoopers, says writing off assets as soon
as possible offers the best tax advantage. For instance, companies
need to properly classify fixed assets to determine if these
assets can be on a seven-year schedule like a desk versus a
39-year schedule like a building. When it comes to building
a new building or adding an addition, Kent points out that it’s
critical to classify as much as possible in the shorter timeframe
depreciation category such as telephone systems, HVAC, lighting
fixtures and wiring to maximize tax benefits.
Another resolution King recommends is to thoroughly review property
tax evaluations and sales and use taxes. “Companies need to
make sure they’re not paying for items that are exempt,” he
says. For example, if an item is used in the manufacturing of
the end-use product, the company doesn’t need to pay sales tax
on the item.
When it comes to inventory, King points out that obsolete items
need to be written off so the company doesn’t pay taxes on merchandise
that isn’t selling or is out of date.
Regarding employees, several thoughts emerged. Art Weiss, CPA,
CFP, senior vice president of private banking for Allegiant
Bank, looked at the New Year’s challenge as personal statements.
Even though his resolutions don’t offer tangible, bottom line
improvements, they do offer successful business philosophies.
For example:
• “I will not underestimate the need to constantly reinforce
the company mission and values to all employees to make sure
that everyone ‘stays on the same page.’”
• “I will make sure that employees have meaningful and candid
reviews at least once a year.”
• “I will not hesitate to terminate employees who have not improved
or that have developed chronic bad attitudes.”
King also points out that a good resolution regarding employees
is to make sure that year-end bonuses are accrued by December
31 and paid out two-and-a-half months later to receive the tax
deduction for the previous year.
Kent adds, “Involve your employees in designing an incentive
compensation package that meets their needs. Many employees
today would prefer alternatives to simply getting a raise in
the current year. Optional days off, job sharing, part-time
employment opportunities or profit-based bonuses may be ideas
your employees find more appealing. In a very tight labor market,
properly motivated people can give a company a competitive advantage.
In designing incentive plans, remember, one size does not fit
all.”
Other business thoughts offered by Weiss include:
• “I will not focus on the profit and loss statement. I will
manage the growth in inventory and accounts receivable to make
certain my business is doing well.”
• “I will communicate with my bankers, key suppliers, key customers
and investors on a regular basis to build a trusted relationship.
I won’t ignore them until I am in trouble and need them.
• “I will create a system that allows me to proactively monitor
historical trends for each item on my financial statements and
be able to explain variances.”
Whether it’s a tax review, trimming costs or improving general
business philosophies, these financial resolutions are ones
companies can and should live with for the year 2001.
Liese L. Hutchison is an assistant professor in the department
of communication at Saint Louis University and a free-lance
writer.
