I wanted to finish the series of hay articles by providing some thoughts on the impacts that low cash flow can have on the suppliers of hay.
As the transition from old season to new season hay takes place, the chances of negative cashflow impacts become even greater for hay suppliers as they continue to operate in a market (especially in Victoria at present) where their customers are low on cash and trying hard to limit purchasing so that they don’t overspend with spring just around the corner.
This can be a double whammy for suppliers. If overdue invoices are stacking up, the ability to have cash on hand to be able to take on a dwindling number of deals becomes challenging which further reduces your available cash…low sales combined with overdue invoices is a great recipe for cashflow pressure.
I often hear hay suppliers talk about the frustration of customers using them as an unofficial overdraft, many operate on cash upfront to avoid this, however this can impact your ability to make sales. This becomes even harder to manage when the number of deals you can do starts to reduce and you need to be more flexible to maximise sales.
It is never easy but there are ways to help manage this situation. Using an overdraft and ensuring you pass on the cost of funds (in the event of late payment) to the end user customer is one option. Many suppliers choose not to pass on interest so this can eat into your margins.
Invoice financing can be used in a similar way. This tends to be a preferred option for larger-scale businesses who have the infrastructure to manage such facilities. Invoice financing can work well, however the facilities are often short-term solutions. And, if your customer doesn’t pay down inside 90 days you often end up still having to find the cash yourself to pay out the short-term loan, whilst you continue to chase the debt.
A number of suppliers also use us at DelayPay. One of our advantages is once we take on the purchase we pay down the cash in full straight away and the end customer pays DelayPay. This eliminates the late payment risk for the hay supplier and also provides a cashflow boost for the end customer.
The use of DelayPay in this way also gives the added bonus of the hay supplier being confident to make sales they might otherwise avoid. With the risk taken care of, they can continue to trade with confidence that the cash will be there when they need it.
Well enough of a plug for us… I do see we have a nifty solution to help both ends of the transaction but as I mentioned above there are other ways. If you would like a chat (as you know by now I enjoy chatting about the hay market!) or if you are looking for a way to make the most of the spring, you can call us or request a callback HERE.