As technology companies continue to compete in a global economy that is being challenged on many fronts today, they face frozen IT budgets, dormant M&A and IPO markets, stagnant R&D spending and a lack of capital. Negotiating the volatility of these recessionary times while maintaining profitability is a challenge for even the most seasoned managers.
Three of Georgia’s ten largest public companies are technology firms. To help weather the storm during this economic downturn, Georgia technology companies should consider the following tools and approaches:
Properly Recognize Revenue. Many companies use their history of successful collections from existing customers as primary evidence that revenue recognition standards are met. Georgia technology companies may need to revisit their policies for assessing probability of collection to ensure they have recent, sufficient evidence that the collection criterion is met prior to recognition of revenue. Policies and procedures may include credit and background checks, confirmation of payment terms with customers and even letters of credit on large or international orders.
Access Capital Using Debt. In order to fund growth, an acquisition or form partnerships and joint ventures in these turbulent times (without accepting a lower stock price or burning cash), technology companies are turning to convertible debt deals. Businesses are also considering switching their debt from London Interbank Offered Rate (LIBOR) interest rate to prime rate and are attaching warrants to the various debt instruments. However, they should be aware of complex accounting-related implications to any of these options, many of which could result in significant charges to income.
