VIEWpoint Issue 1 | 2022
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Ask the Advisor: Key Tax Incentive Changes
Weathering the Storm of Rising Inflation
The answer is to run some scenarios. You want to determine if you have enough cash flow to operate during a downturn, and quantify the impact of any decisions made during this time.
One of our clients recently considered shutting down a slow-moving division, until scenarios revealed it would cost more than $300,000 and simply slowing down production made more financial sense.
You most likely did budget planning in the fourth quarter of 2014, and you were probably planning for a high-growth year. Revisit the budget and determine any adjustments that need to be made for the remainder of the year. Make sure you have a flexible budget that rolls ahead so you can see changes and react to conditions.
Also look at break even and make necessary adjustments. Run short- and long-term cash-flow projections as well. Be proactive in looking at where you could adjust costs if needed. Take a look at bulk purchasing commitments and scale back where appropriate.
Longer than you probably think. Expect most changes to take about 60 days before you start to feel them. In the case of cutting staff, for example, severance pay or paying out unused vacation will eat cash for a good while following any layoffs.
Jennifer Mailhes, CPA, is a shareholder in Doeren Mayhew’s Houston office and can be reached at 713.789.7077. For more information or assistance navigating unstable economic conditions, contact our CPAs and business advisors in Michigan, Houston or Ft. Lauderdale.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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