Alternatives to increase company liquidity

16 de November de 2011

The global economic crisis has set in. The recession is now felt on all continents. The situation is somewhat more comfortable for the Brazilian economy, since that until mid-March we worked with only the prospects of decreased growth. On account of a larger domestic market, it was believed the country would be better prepared to temporarily absorb the impact of the crisis. However, with the announcement of worrisome numbers related to the fourth quarter in 2008, the domestic market braces for hard times.

Companies had sounded the alarm some time ago and have been making arrangements to cut costs. At a time like that, it is important to evaluate the business and the entire operation to define the tax and labor alternatives that can be adopted.

“Reviewing the company’s reality and analyzing how to properly interpret the legislation actually decrease the tax load”, said Jefté Fernando Lisowski, Coordinating Director at Pactum’s Florianópolis unit. Companies may review their operations and evaluate the best incentives available to maximize the profitability of an operation or the entire company activity.

“There are also countless optimization possibilities labor-wise. We need to perform a customized analysis taking into account each company’s line of work, profile and needs. In other words, we need to look at the context and assess the possibilities for cutting costs”, explained Lisowski.

“Layoffs lead to immediate substantial disbursements, which are oftentimes not viable given a lack of working capital. Those are costly actions that may be avoided through alternatives like vacation shutdowns, shorter hours, time banks, and so on”, added Gilson José Rasador, Coordinating Director for Pactum’s São Paulo unit.

That, however, is but one end of the equation. Tax planning also looks into alternative forms of income by appropriating credits due and decreasing liabilities. “An ever-growing number of companies has tax credits to receive, such as ICMS (tax on the circulation of goods and services), PIS (social integration program), COFINS (contribution to fund social security) and IPI (tax on industrial goods). Nevertheless, there are a few hurdles to overcome. For instance, the states have been imposing obstacles to authorize transfers to third-parties. In turn, the federal government has been restricting the possibilities for using the credits, and cash refunds, when applicable, take three to five years”, explained Rasador. Exporting companies, which already finance the production and the shipment of products to their clients, see a good portion of their working capital turn into credits against the states and the federal government and suffer the impact of such postponement policy: “The solution is to work on possibilities to expedite such processes administratively or via lawsuits”, he added.

As we can see, alternatives for responding to the current scenario exist. Right now, the law can and should be used from an operating, strategic result-oriented standpoint and no longer for individual issues. The only thing we are certain of is that we can no longer deny the crisis and the existence of its impact on business.