FTMTA ProDealer credit policy
Approaching the busiest period of the year for mechanised activity on Irish farms, the association suggests that it is an opportune time for farm machinery businesses to consider implementation of the FTMTA ProDealer credit policy. The policy is designed to improve the cashflow position in the farm machinery industry by tackling the longstanding issues around credit in the sector.
The viability and sustainability of the farm machinery sector overall and of many individual businesses is endangered by inadequate control of credit. Many dealerships have levels of outstanding debtors that are totally disproportionate to their turnover. As well as the amount owed, there is a substantial problem with the age of some of the debt. Such a situation, in the long term, benefits neither supplier nor customer. It is in the interests of FTMTA members’ customers that a viable, local farm machinery industry continues to exist to deliver the support that they require.
The association has calculated that it is costing many dealerships up to 20% of the book value of their debtors to collect the money owed. This is made up of staff costs, cost of money and write downs. It is unlikely that any sector can take such a cost and the machinery trade certainly cannot. The sector is one of tight margins with limited availability of working capital and much reduced credit from suppliers at the wholesale level.
The benchmark figure to gauge the health of the farm machinery sector has traditionally been the registrations of new tractors. A look at the current numbers gives an indication of how challenging an environment the farm machinery sector is.
The registrations of tractors in 2014 were the highest that they had been since 2008, but were still considerably less than half of what they were in 2008. The situation deteriorated in the first four months of 2015, with registrations down 7% compared with last year. The FTMTA policy allows for the provision of credit, but on an agreed basis. A detailed document in relation to the FTMTA ProDealer credit policy has been prepared, which contains step-by-step guidelines as well as templates for the documentation required to implement the policy fully and successfully in a farm machinery business.
FTMTA member firms should contact the FTMTA office to receive their copy of the full FTMTA ProDealer credit policy.
Be a part of a stronger farm machinery industry – join the Farm Tractor and Machinery Trade Association – contact FTMTA at 045 409309 or firstname.lastname@example.org for details.