Business in the building supply industry in Florida has been tough this year for most people, and there is no way we can put a new dress on it to make it look any better. Like most of you, I can't wait until about three months from today, in which I will be sipping on cheap champagne, singing Auld Lang Syne, and saying goodbye to this backbreaking year. I don't believe anyone will miss 2008.

Don Magruder However, the last months of 2008 will lay some more licks on us if we are not careful. Now is the time to really look at your operations for warning signs.

First and foremost, we all need to review accounts receivable on a daily, weekly, and monthly basis to insure we are getting paid. If you have not monitored and controlled your credit over the last year, it may be too late. Huge balances in the 90-day-plus categories will be extremely hard to collect now, and most builders are unable to secure additional financing of properties to bail them out. Before 2008, if a builder got in trouble, he could get a special bank loan or sell property. Now those are not viable options. Many will simply have no means to pay you.

Then, of course, there are the surprises many of us have seen. The builder who has been paying you well all the way through this slowdown, then, on a Monday morning, you find out he is closing his business and going bankrupt. In cases like this, usually you are the only one being paid, and he is severely past due with everyone else. The surprises hurt the most because those are the people you trust the most. The key to avoiding surprises is to have your own people listening for information in the field and then communicating it back to management. Don't get caught in the trust trap by trying to convince yourself it's not true. Let the facts speak for themselves. As President Reagan used to say, "Trust, but verify."

Your inventory is the other part of the balance sheet that needs extra focus during the next months. Many of us have greatly reduced our staffs, and now we have limited staff and oversight people. Don't forget that this is just as hard on your employees and customers as it is on you. During times like these, even good people will take desperate action. Have in place the checks to insure your employees and customers are not stealing from you, and make sure all inventory is secured nightly.

Recently, I was told about several companies that have caught employees doing fraudulent refunds to take cash out of the store. This is the same thing as inventory theft because they are adding inventory erroneously back into your business. It is very wise to make sure all refunds have management approval, and that more than one person is involved in processing a refund.

In the present market environment most people are making no money off operations. Those who are able to survive will do so by having good collection methods and strong inventory control. There is not a business that can survive operational losses coupled with a huge loss in credit or inventory.

Regretfully, I believe in these final months, credit and inventory will be the primary reasons we lose some companies in Florida. So keep a firm hand on your account receivables and inventory, so we can all get building again.

Don Magruder is general manager of Ro-Mac Lumber & Supply Inc., Leesburg, Fla., and chairman of the Florida Building Material Association. This article originally appeared in the Sept. 4 FBMA newsletter. It has been edited here for ProSales format and style.