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Manufacturers: Consider Investment Recovery to Boost Profits

Posted by Concannon Miller on Thu, Dec 26, 2019

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Manufacturers: Consider Investment Recovery to Boost ProfitsManufacturers - take a look around your facility. If you've been building up piles of scrap, excess raw materials, obsolete equipment, returned inventory and spare parts, you probably need an investment recovery program.

Idle assets have value to someone and selling them off makes sense for manufacturers. As much as 70 to 90% of every dollar generated by investment recovery goes to a company's bottom line as profit, according to the Investment Recovery Association, a trade group for managers of surplus and idle assets.

Most of the association's members are Fortune 1000 companies whose recovery programs save an average of $8 million annually. Some save as much as $150 million.

New call-to-actionYou don't have to be in their league to profit from investment recovery, but don't go into it with a garage sale mindset — selling your company's idle assets for whatever you can get just to clear them out. Investment recovery is a serious business that the Center for Advanced Purchasing Studies includes in its benchmarking reports.

The goal of a recovery program is to get back as much of your capital investment as possible. That means the program needs to become an integrated, systematic part of your operation. Find a certified manager of investment recovery or a certified appraiser who can put a fair market value on your goods and identify outlets for moving them.

READ MORE: 5 Tips to Improve Inventory Management for Manufacturers

Investment recovery professionals use a variety of specialized methods and strategies to recover the value of an asset, such as returning it to the manufacturer or distributor, selling it or trading it for another asset. There are several other markets for your idle assets, some of them close to home, including:

Inside the company: Let's say you have a forklift that's been in mothballs. Is there another department that can use it? Redeploy it to a new location.

Employees: If you are looking to replace storage cabinets, files, tools, PCs or desks, chances are, your employees would welcome the opportunity to buy them.

Charity: Donate your equipment or office furniture and take a charitable tax write-off.

Internet: Online auction sites and brokers play an increasingly important role in asset recovery and can dispose of just about anything you have to sell. These sites are also a good source if you're looking to buy assets.

If you need additional motivation to start an investment recovery program, consider this observation from the Investment Recovery Association: For every dollar generated by investment recovery, it would take $20 in sales to achieve the same net effect on profit.

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Topics: Manufacturing

Concannon Miller’s unique, holistic and intimate approach to financial health sets us apart from smaller CPA firms with more limited resources as well as mega firms where mid-sized clients struggle for attention. Contact us here to talk about improving your business.

This communication is designed to provide accurate and authoritative information in regard to the subject matter covered at the time it was published. However, the general information herein is not intended to be nor should it be treated as tax, legal, or accounting advice. Additional issues could exist that would affect the tax treatment of a specific transaction and, therefore, taxpayers should seek advice from an independent tax advisor based on their particular circumstances before acting on any information presented. This information is not intended to be nor can it be used by any taxpayer for the purposes of avoiding tax penalties.

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