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Let’s Rethink Everything??
by Jeff Mollet

The Times they are a changin’...and so are the prices on most everything you buy and sell. For those of you who are lucky, your increased selling price is exceeding your increased buying price. For the rest of us, now may be the time to step back and re-assess our business in general. This would of necessity include a review of each and every expense so as to determine whether any cost controls could be put in place. Your accounting professional would be a great place to start on those issues.

Less obvious but perhaps more costly in the long run are what I call the “doing business costs” that are lurking out there for all of us. For me it may be malpractice, for a hospital it could be an inappropriate disclosure of medical information, and for you it may be liability for chemical drift. These are all potential costs of doing business, that is, the risks associated with your day-to-day operations that do not generally show up on the balance sheet unless something bad has happened - and then it can be devastating if you have no risk management in place for that contingency. Therefore, while assessing your businesses day-to-day operations and expenses, this is also an appropriate time to re-assess (or consider for the first time for some of us) these “doing business costs”.

Here are some initial areas to think about...

Insurance - the cost of the premium is clearly important, but have you had a professional audit your coverage to make sure you have enough coverage and that it is in the right areas. Most policies require a minimum amount of coverage in relation to the actual assets being insured. If you do not carry sufficient coverage, the policy will only provide a partial benefit in the event of a loss. We could all be “insurance poor” if we were to purchase all of the neat coverages out there (life, health, disability, dental, vision, property, casualty, business interruption, automobile, commercial, umbrella, etc.) so it is imperative to obtain professional assistance in selecting the coverages you need for the risks you really want to protect against. Your insurance agent, working with your business attorney, can help you identify and protect against the appropriate risks. A lack or absence of coverage is not a surprise one needs to discover after a loss occurs.

Employee Relations and Regulations - as I have indicated in past articles, many of the biggest individual verdicts in the nation are a result of employees suing their (former) employers. Every business, no matter how small, should have a well defined employment policy in place and should follow it at all times. This policy should address such things as vacations, sick leave, medical leave, benefits, retirement, telephone and computer usage, professional conduct, etc. The list is ultimately endless, but the basics are necessary to give an employer some level of protection. Once a basic employment policy is developed and implemented, it is then imperative to create and maintain an employment record or file for all employees. When available, this file should at a minimum contain the employee’s resume, written application for employment, tax forms and a record of any commendations or discipline since their date of hire. Check with your corporate attorney to see about developing a policy and procedure tailored to your needs. It could be money well spent in the long run.

Credit Policy - do you have one? Do you need one to screen for potentially poor customer risks? This is one of the areas where businesses can act to limit their risks that could actually result in an improvement in the bottom line - less bad debt write-offs or more income because you only sold to those customers who pay. Again, the key is to develop and implement a credit policy that is appropriate for your business and to then apply it across the board to all customers. The acceptance of credit cards and electronic payments may also be an important part of a credit policy. Any way to allow the customer to pay an invoice in a timely manner is probably a good idea. Work with your banker and counsel to develop a policy that is appropriate for your business.

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