BANK, INVESTMENT ACCOUNTS
A bank run occurs when a large number of banking customers fear their bank may fail and begin withdrawing. When faced with mass withdrawals, the bank may become destabilized and collapse. The most recent bank run in U.S. history occurred in March. Customers of Bear Stearns feared the subprime exposure was too great for Bear to handle. With the resulting run, Bear's market capitalization decreased by almost 90%, and the company was doomed. This unfortunate and unusual situation may play out again in the near future with other banking institutions.
All bank accounts are insured by the Federal Deposit Insurance Corp. However, FDIC protection is only up to $100,000 per depositor and may not cover all ESO assets held at a bank. ESOs should keep their assets at any one bank under $100,000, including certificates of deposit. To ensure coverage, ESOs might divide their assets between several banks. Another alternative is to utilize a brokerage account. Every brokerage account is insured by the Securities Investor Protection Corp. (SIPC). The SIPC insures accounts up to $500,000 ($100,000 cash, $400,000 securities) combined. Most brokerage firms offer money market accounts, which are considered securities by the SIPC. Additionally, most brokerage firms offer supplemental account insurance for up to several million dollars at no charge.
Investment accounts should be reviewed with your financial advisor. Consider utilizing stop-loss orders for all of your equity positions, including mutual funds, stocks and investment trusts.
Most corporations have credit lines available should they need them to cover expenses or purchase capital items. ESOs should establish their own lines at high-rated banks. These lines should never be utilized for nonessential items, and should only be used if your ESO can afford to pay them back in full after considering major income decreases. Never consider paying bills with credit unless you have exhausted every other possible solution, including negotiating with the creditor, fundraising, advances on municipal stipends or outright begging for donations.
BUYING COOPERATIVES AND VENDORS
There are many buying cooperatives available to nonprofit and municipal organizations. ESOs can access many of these with little effort or monetary commitment. Buying cooperatives have been established for just about everything from vehicles to office supplies. If a specific cooperative does not meet your needs, join several or create your own. Fire and EMS associations can be helpful in creating a strength of numbers to negotiate with vendors.
Negotiating contracts with vendors and insurance providers takes great skill. The person sitting across the table from you knows this already. If you push too hard, they may walk away, leaving you with substandard vendor choices. If you push too little, you may pay too much or receive too little in return. The use of a professional buyer or negotiator might be a better solution when dealing with vendors. Additionally, your solicitor or legal counsel should be consulted to review the details of any complicated contracts you consider. You must also consider the vendor's ability to deliver your prepaid goods and services should they encounter financial hardship.
Nonessential support staff may need to be dismissed during slow economic times. This difficult decision should be executed only with the full interests of your organization in mind. Supervisory staff may need to be redeployed into the field. Part-time staff may need to be removed from the schedule, and vacancies filled with salaried personnel. Contract labor may provide a valuable alternative to the rising costs of employee benefits. ESO employee unions and collective bargaining units may be forced to take concessions. Unions might consider possible concessions before mandatory cuts are announced.
When forced to downsize staff, ESOs may spend a considerable amount of money on the remaining employees' overtime compensation. Overtime may be reduced by changing the status of full-time employees from hourly to salaried. Tracking trends in call volume, times and locations may be beneficial when scheduling crews and staging units. Overtime generated by late calls may be reduced by utilizing a dictation service for call documentation or incident reporting.