4Thought Blog

On June 21, 2018, the U.S. Supreme Court issued a momentous decision that affects remote sellers and service providers across the country and the digital economy at large.

The Court’s South Dakota v. Wayfair decision allows states lawfully to require remote sellers to collect and remit sales and use taxes if they have an economic nexus, usually defined as a certain number of transactions and/or a minimum amount of revenue, with the destination state.

After South Dakota’s law was upheld, other states enacted similar laws. Today, 42 states have economic nexus for sales and use tax, some with enforcement deadlines approaching (Colorado, Pennsylvania, and Texas have enforcement deadlines of June 1, July 1, and October 1, respectively).

If 42 separate tax rates sound like a lot, try 16,000—that’s the ballpark of state and local tax rates in effect at any time. Adding to this administrative nightmare, tax rates can change on a monthly basis, generating as many as 600 to 700 changes throughout the year.

The latest technological innovation in manufacturing is likely coming to a plant near you — maybe even to your plant. It's the "automated warehouse." As technology, such as Big Data and the Internet of Things, improves other aspects of the supply chain, the traditional warehouse is undergoing radical changes. Manufacturers can't afford to ignore these developments.

Do you ever get an uneasy feeling that your purchasing system is out of whack? Are you concerned that expenditures are being made on your company's behalf that would never meet with your approval?

Finding an agreeable balance within a purchasing system can be a hard-won victory. Some manufacturers react by over-controlling expenditures without regard for how much money is lost when an executive invests an hour reviewing purchases of $100 supplies that are fairly routine.

The benefit of coming up with a workable purchasing system can usually be measured in savings. For instance, one manufacturer had several different locations -- each with its own approach to buying paper, pens and other materials at various local office supply stores. By consolidating purchases, the company saved 15 percent in expenditures.

In the current political climate, just about the only thing manufacturers can be certain about is continuing uncertainty. Everything from changes to foreign trade policies, to new tariffs, to military actions threaten to disrupt smooth operations in the manufacturing sector.

To complicate matters, there's no clear timeframe for when (or if) events will transpire. Already, manufacturers are coping with the rising costs of raw materials and subsequent pushback from customers with long-term contracts. For example, your firm may have been forced to find cost-effective alternatives or make certain concessions.

So what's the forecast? For most manufacturers, it's “wait and see.” However, you can take several steps now to weather the storm and minimize potential economic damage. These steps can also help position your company to benefit from any favorable conditions that may arise.

The term "lean manufacturing" means different things to different people. However, it can generally be agreed upon that lean manufacturing represents a management philosophy that emphasizes the elimination or reduction of waste in order to increase company profitability. In other words, doing more with less.

Lean manufacturing is often associated with the Toyota Production System (TPS) that helped catapult the car-maker into worldwide prominence. But some industry experts trace its roots back to the Industrial Revolution and Eli Whitney's systemization involving interchangeable parts. Others link lean manufacturing with the Six Sigma set of practices designed to improve processes. In any event, the TPS is often cited as a successful model for implementation of lean manufacturing principles.

Keeping that in mind, consider the following eight steps for applying lean manufacturing to your business operation:

Last year’s Wayfair decision is a momentous development in the debate over the digital economy’s responsibility for the collection of sales tax. As companies increasingly conduct business across state lines, how states and the federal government craft tax legislation that addresses the evolving definition of “nexus” significantly impacts all taxpayers—including manufacturers.

(Background: In June 2018, the U.S. Supreme Court ruled in the landmark case South Dakota vs. Wayfair that the “physical presence test” for determining if a seller is required to administer sales taxes is “incorrect.” States may now legally require sellers to administer sales taxes, even if the seller has no in-state physical presence.)

While many states offer manufacturers generous sales tax exemptions on certain equipment and machinery purchases, the industry is now faced with new sales/use tax rules that impact both purchase and sale transactions. The Wayfair decision has important business implications manufacturers can’t afford to ignore—lest they wind up with a hefty tax bill they didn’t plan for.

If your company would like to tackle the international market, it's time to evaluate your chances of success.

Manufacturing firms that successfully make the leap generally tend to have a firm domestic base, strong reputations and a quality product. A solid track record is also essential before expanding abroad.

But there's more to it than that. Before taking on the world, realistically examine how your skills and resources fit into a highly competitive global environment. Here are five points to consider:

Cash flow is the lifeblood of every manufacturing company. While many business practices factor into your company’s cash flow, two are especially important: cash management and obtaining outside financing.

Effective and efficient cash management practices can help best administer the money coming in and out of your business. And bank loans can sometimes be necessary to provide your company with a cash flow influx, especially during times of expansion or other capital projects.

Read on for tips for cash controls, negotiating bank loans and your company’s cash conversion cycle.

The R&D or Research and Development Tax Credit is available to far more industries than you’d think, including manufacturing, construction and software development among many others. You don’t have to develop a new product to qualify; even improving processes can be a qualifying activity. The R&D Tax Credit is one of the most lucrative available as it’s a dollar-for-dollar reduction in tax liability.

Whether you’re looking to buy a brewery, sell a brewery, gift some ownership to a partner or successor, or are just plain curious, the question of value is of primary concern. Ask any valuator worth their salt and he or she will tell you, valuation is an art, not a science.

There is no black and white formula for determining what a brewery is worth. However, there are time tested and generally accepted methods within which one can work to derive a fair value.