Your Economic Outlook – A Proactive Approach

Proactive

A group of my fellow trusted advisors and I lead a regular “Executive Coffee Forum” at which executives and business owners from the Denver/Boulder area discuss business challenges and solutions. Dan Morris, with High Point Financial Group, was making a presentation on the economic outlook when I had an “aha” moment about a situation that is all too common in business. Many of us fall into the trap of directing our time, energy and focus internally, working “in” our business instead of “on” it. One of the costs associated with that approach is that we may not be giving adequate attention to the outside economic influences that affect our businesses.

Three economic factors – interest rates, inflation rates and income tax rates – are working behind the scenes and affect our businesses, whether or not we’re paying attention. Being proactive about them can certainly help us minimize costs to our companies. Following are a few tips in each of the areas:

Interest Rates

  • Regularly monitor interest rates against current loan rates and take advantage of opportunities to reduce interest costs.
  • Use interest rate forecasts to anticipate loan terms when you are planning to borrow.
  • Gain an understanding of rate forecasts and apply that knowledge to your cash investment strategies.

Inflation Rates:

  • Stay current on the trailing 12-month inflation rate.
  • Know the forecasted annual inflation rate.
  • Ensure that your sales pricing reflects both past and forecasted inflation rates.
  • Don’t wait until inflation-driven costs have been incurred to raise sale prices; anticipate those costs and act before you experience a loss.
  • Develop your strategy such that your net annual income increases at a rate greater than the inflation rate.
  • Be wary of CPI (Consumer Price Index) as your guide; it doesn’t include gas and other contributions like food. Inflation is historically greater than CPI.

Income Tax Rates:

  • Engage a CPA for annual tax planning.
  • Learn how to minimize both business and personal income taxes.
  • Work with a financial advisor, CFO AND CPA to address tax planning, taking into consideration your assets and needs over various timeframes.
  • Make quarterly accruals for projected income tax liability or make estimated tax payments

A pause to consider these economic factors can reveal the possible adverse effects they can have on your business, so that you don’t fall victim to their influence. Build some time into your schedule to focus on these external elements and be proactive in managing their impact on your business. If you wish to be part of future Executive Coffee Forum meetings in the Denver metro area, please email me at rick@cforickarthur.com for consideration.

 

Rick Arthur

Written by

Rick Arthur is a CFO whose expertise is built on Financial Intelligence and 35 years in senior financial roles. Coupled with a CEO’s perspective and the experience of building his own $20 million company, he brings a unique depth of insight into business from the top down. Wired to get to know people, Rick works hand-in-hand with business owners of intentional, growth-oriented companies, solidifying relationships as a trusted advisor and confidant to his clients. He leverages his experience to help business owners gain traction and stay laser-focused on the company’s vision, cash flow, and profitability – all while creating big picture solutions for strategic planning, growth and sustainable success.