Farm Ireland

Friday 23 February 2018

Regular cash flow can prevent businesses from going to wall

Derek Casey

Derek Casey

One of the concerns expressed about the new credit policy at the conference was how farmer and contractor customers would react when they were asked to sign up to a direct debit account.

Could farmer customers react badly and take their business elsewhere? And could dealers lose business to competitors who, for whatever reason, don't adopt the new credit policy?

To get some answers, I spoke to a dealer who has been implementing the Pro-Dealer credit policy for the past year.

The dealer in question wished to remain unnamed, but he runs a multi-branch outlet with a sizeable turnover, so by now he has a fair idea of the key issues involved in rolling out the new policy.

I started by asking how his customers reacted. The dealer principal explained: "In the beginning, some of my customers were a little unsure as to what a direct debit was; a few customers even confused it with a 'pay-on-the-day' policy or some kind of a credit card payment and so they thought it was going to cost them extra money.

"My advice to the FTMTA and to other dealers is that they should ensure that all farmers know what a direct debit means.

"You must explain to the farmer that he or she will be paying the bill at the end of each month, once a month.

"Once we had explained that clearly, our customers started to see that there are benefits in it for them as well.

Also Read


"Most farmers have told me that they prefer this new arrangement rather than getting landed with a massive bill twice a year because the direct debit allows the bill to be kept in check year round.

"I've been flexible with customers, too; I had one case last month where a once-off service bill of €10,000 was due to fall on the November direct debit.

"I agreed to let the customer pay that over a couple of months; you have to play ball and be fair once an effort is being made to pay the bill."

Regarding the difference the Pro-Dealer credit policy has made to his cash flow, the dealer principal told me: "I'll put it this way; since I implemented the new system last year, the lowest monthly income I've had was €27,000 and the highest was €48,000.

"That's all money that, if it hadn't been signed up to approved accounts, I would have had to be out every night in a panic trying to collect from customers to pay my staff at the end of the month. It's made a massive difference to cash flow.

"Had a similar system been around a few years ago, I'm pretty sure it would have stopped a few machinery dealers going to the wall as a result of the recession."

On how long the system might take to implement fully, this particular dealer reckons it takes about two years.

"There's quite a bit of paperwork involved with banks and you have to get all staff and customers singing from the same hymn sheet," he said.


"But again, for a smooth changeover it's crucial to show that there are benefits for both parties.

"We all have our running costs to pay; it helps me to sleep at night knowing that I will have a certain amount of capital to work from at the end of the month.

"And for the customers, they can avoid running up any big unexpected bills."

Finally, what about customers who refuse to sign up?

"In my experience, the customer who hasn't signed up for us yet is the guy who always pays up on time anyway, so that hasn't been a problem," the dealer explained.

"But I would have to be upfront and tell the customer that the days of getting six months' credit are well and truly gone."

Indo Farming