FTMTA ProDealer Credit Policy
In the midst of the busiest months of the year for mechanised activity on Irish farms and consequently a very busy time in farm machinery businesses, it is an opportune time for FTMTA member firms to consider implementation of the FTMTA ProDealer Credit Policy. The policy was designed a number of years ago to improve the cash flow position in the farm machinery industry by tackling the long standing issues around credit in the sector.
The viability and sustainability of the farm machinery sector overall and of many individual businesses within the sector is undermined by inadequate control of credit. Many dealerships have levels of outstanding debtors that are totally disproportionate to their turnover. As well as the amount owned there is a substantial problem with the age of some of the debt. Such a situation, in the long term, benefits neither supplier or customer. FTMTA believe that it is in the interests of our members’ customers that a viable, local, farm machinery industry continues to exist to deliver the support that they require within their farming businesses. The level of support required by modern farm machinery can only be provided by well funded, professional, farm machinery farm machinery businesses and credit management has a role to play in this.
The Association calculated some years ago that it was costing many dealerships up to 20% of the book value of their debtors to collect the money owed. This was made up of staff costs, cost of money and write downs. It seems unlikely that any sector can sustain such a cost and the farm machinery trade certainly cannot. The sector is one of extremely tight margins and much reduced credit from suppliers at the wholesale level in comparison to that enjoyed in years gone by.
The bench mark 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 a business environment the farm machinery sector is to operate in. The registrations of tractors fell some 13% in the first five months of the year when compared to 2017 and is slightly less than one third of the level of registrations in the same period of 2008, the last year prior to the downturn.
Credit can be an important aspect of any business relationship and the FTMTA ProDealer Credit Policy very much allows for the provision of credit but on an agreed and controlled basis to benefit of both parties.
FTMTA member firms should contact the FTMTA office to receive their copy of the full FTMTA ProDealer Credit Policy which will be issued by post.
Be a part of a stronger, professional, farm machinery industry – join the Farm Tractor and Machinery Trade Association – contact FTMTA at 045 409309 or firstname.lastname@example.org for details.