Logging Articles
Plan your breakup strategy now
Ken Davidson
BDO Dunwoody LLP
November 2005, Interior Loggers Magazine
For many loggers today, work consists of hanging on until the situation improves. It is the companies that find every possible edge, that have the greatest likelihood of being able to benefit from the turnaround, when it comes.
From my experience in working with logging companies, one of those “edges” has to do with what a logging company does when it can’t work in the woods – during breakup.
Most companies understand the importance of determining what work will be needed on their equipment after the stresses of the winter season. As breakup approaches, their owners are on site, checking on required scheduled maintenance, looking for evidence of damage and wear and tear, and getting an idea on what it will cost to get the equipment ready for the summer. All of this is necessary.
What may need improvement is the strategy for when the equipment arrives back in the yard. Many will take their accumulated cash and spend it on whatever hurts the most. Some will leave the biggest repairs until the end of breakup, reasoning that this way, they won’t have the resulting repair bills on their desk for too long, before the company starts earning income again from summer operations.
However, this means that their repair jobs join an already-long lineup with mechanics. The wait gets longer in the cases where parts are not available off the shelf, but must be custom-machined. As a result, their equipment may stay unusable during the first few weeks of the summer season. It can also mean that they have difficult relations with service companies and parts suppliers, who end up waiting for their money.
Therefore, it is best to spend the winter building a nest-egg to cover your ongoing payments during breakup, such as for rent, utilities and clerical staff salaries.
Use the pre-breakup inspections to plan the repair work and set priorities. Set plans in place to handle the cashflow, such as negotiating skip payments with vendors so you don’t cause strained relations when you aren’t able to meet the payment schedule.
Following the inspections you did during the winter, in-shop inspections will give you a more clear idea of whether you can repair a skidder, feller-buncher or truck, or if you should be looking at replacement. This is the time to attend trade shows and visit dealers to see what improvements have been made in equipment, which will allow you to be more efficient and effective.
Talk with your business advisor about your capital strategy – if you aim to replace a piece of equipment, there are some situations in where it is best to buy, and others where leasing is a better choice. With the right advice, you’ll be in position to swing into the summer season.
Ken Davidson is a Partner in the Kelowna office of BDO Dunwoody, and has nearly a decade of experience advising logging companies on business issues. He can be reached at 250.763.6700; kdavidson@bdo.ca.
