Local Accountants Sound Off On Fiscal Future | Tips for getting through a tough economy
Photo/Courtesy
C. Joseph Ciccarello, managing partner at Gray, Gray & Gray in Framingham.
When faced with highly stressful or dangerous situations, humans involuntarily fall back on one of the very strongest impulses in human biology: the one that impels us to either fight or flee.
Combine that with two of the strongest motivators in the human psyche — fear and greed — and it’s understandable that accountants may have their hands full with clients displaying a wide range of emotions and impulses. Some clutching their cash and waiting for the current economic storm to blow over, others boldly spending in order to put the last few nails in the competition’s coffin.
And as the Wall Street fallout continues to ravage the region’s economy, Central Massachusetts accountants are advising those clients to fight and flee, to be greedy and fearful, as long as the result is survival.
Terrence Shepherd, managing partner at Worcester’s Sheperd & Goldstein LLP, is clearly in the “fight” camp.
“Everybody’s struggling for cash, even just to pay bills,” Shepherd said. “They’re redoing their value propositions and trying to keep clients and maybe take some of their competition’s clients.”
And that’s the way it should be, he said. “It’s not all doom and gloom. You can’t just curl up in a ball and wait for it to be over.” The Wall Street meltdown and its local effects are the result of “spoiled living and spoiled spending,” Shepherd said, and businesses now must get their noses back to the grindstone. Shepherd said he advises business clients to examine what they’re offering their existing clients to make sure those clients aren’t out shopping for a better deal.
Spend Money To Make Money
“You may have to spend more money in direct marketing, but you have to do more than just cutting back and waiting for the customers to come through the door; you can’t just not spend money.”
John E. Graham, managing partner at Graham, Huckins & Shepherd in Worcester, is perhaps a little more conservative. He, too, advises business clients to be on the lookout for the opportunities that an unpredictable economy creates but he also advises clients to “horde cash and wait” for those opportunities to come along, whether it’s delivering a finishing blow to the competition or acquiring the competition outright.
But first, businesses must get smarter about what they do with their cash, Graham said, especially as the credit market continues to tighten. “If you have a $3 million line of credit and the bank recognizes that you’ve never used more than $2 million, they’re going to cut you back to $2 million,” he said.
C. Joseph Ciccarello, managing partner at Gray, Gray & Gray in Framingham, said cutbacks like that, while they may strike fear into the hearts of businessmen and women, will help make businesses smarter, more efficient, more frugal and more successful in the long run.
But the road to get there can be rough.
“We’ve had a number of deals, mergers and acquisitions, that were about 90 percent done and all of a sudden because of additional demands from the financial institutions, the deals are on hold,” Ciccarello said.
Beasts Of Burden
Financial institutions are asking for additional collateral or more detailed lists of customers and intangible assets, Ciccarello said. “Lines of credit that were automatically renewed, you have to make sure your client is in compliance with all the loan covenants, because if they’re not, they will not renew. You used to be able to get a waiver for certain requirements.”
Unfortunately, in addition to counting on waivers for certain loan requirements, many businesses slacked off on simple savings in recent years, Ciccarello said.
Business were saying, “If I’m paying the taxes, I want the money,” Ciccarello said, “and they were not building their retained earnings. They were not as healthy as they should be” and now they don’t have the resources to make it through the hard times.
Those businesses will have an even harder time as they “go down the profit and loss statement line by line and ask, ‘do I need this expenditure?’ You have to do whatever it takes to show a profit, or you’re really going to be in serious trouble,” Ciccarello said.
And at that point, a business might be takeover bait for a healthier company.
Bill Tarzia, a partner in the audit department at CCR LLP in Westborough, said, “Stick to your fundamentals, and if you feel like you’re enacting your business plan, you have to keep moving forward. You can’t live in fear. Treat this as a temporary situation.”
And if a company’s balance sheet is strong enough, if it’s got enough cash on hand, “you might be able to pick up a competitor or product at a discounted cost.”
“This economy is going to make everyone better managers,” Ciccarello said. “And it’s going to make us better. We have to have the guts to really advise, and often in small business, that means laying off your friends.”
WBJ Web Partners
Most Recent
Most Recent
0 Comments