Change is inevitable and for those responsible for putting together an organization’s financial structure, the probability of change has to always be considered.
In a recent Monitordaily.com opinion piece, Patrick Gaskins, CTP, senior vice president of Financial Services for AmeriQuest Transportation Services, discussed how financial professionals need to consider how change will affect both fixed and variable costs in order to plan for the future.
As Gaskins notes, in addition to fixed and variable costs, there are a number of other factors to consider as well including equipment specification trends, used asset values, inflation, interest rates and utilization. All of these factors can, and likely will, experience changes, so the job of financial planning is much more complex than might at first be considered. And these factors are all subject to changing technology and a fluctuating economy.
Although some costs can be ascertained with some sense of accuracy, Gaskins often talks about the “what if,” that need to consider the unknowns along with the knowns. When it comes to assets, he suggests that companies need to accept the reality that ownership or rigid fixed-rate, start-to-finish financing doesn’t offer the flexibility that is available with leased or usage based financing programs.
An important way to keep ahead of changes (or as far ahead as one can be) is to evaluate your asset performance and financing each year, or better yet, each quarter. This will allow you to respond with greater speed and flexibility as changes occur. However, a note of warning from Gaskins: changes that are made should not be made wholesale. Instead evaluate what is occurring within your company, the industry, and the economy in general and make minor course corrections.
Most important, don’t get ahead of yourself. Act on what is actually happening, not on what may happen tomorrow. Gaskins also suggests looking at historical trends over a 10-year period and base your decisions on those in addition to current conditions.