Rob Mercer, senior regional director at Ashley Finance, makes the case for invoice financing as a means of keeping fleets rolling
The transport industry in the UK has faced its fair share of challenges in recent years.
From rising debts and fuel prices, congestion charges, high operational costs, new legislation surrounding emission levels and of course, the ongoing and unpredictable nature of the British weather, it’s been something of a rough ride.
When so many challenges combine over a short period of time, there will inevitably be consequences for cashflow and business growth.
Indeed, just last month it was revealed in Creditsafe’s Watchdog Report for Q2 of 2017, that the UK’s transport sector’s bad debt (money owed to the industry) rose by 178 per cent, whilst the amount owed by the sector to its suppliers grew too by 161 per cent.
This year has seen the emergence of one particularly significant challenge. Since the Brexit referendum last year, the sector has been stung by a constant string of exchange rate fluctuations.
In total, the sterling has lost around 14 per cent against the dollar and 13 per cent against the euro – making it more important than ever for haulage companies to buy fuel when the exchange rate is right.
Being able to make off-the-cuff purchases, pay suppliers, cover staff weekly wages and meet various other immediate financial obligations – all whilst waiting for invoices to be paid, and praying they’re not late – can mean this is all easier said than done.
Businesses are under constant pressure to maintain their cashflow. So, what can those functioning in the transport industry do to make sure their cash keeps flowing, and their company keeps growing, despite the various pressures at work?
Seek help where you can
There are options in place to help companies manage their cashflow. It’s a natural part of business to require a little help sometimes, and external funding can allow for breathing space in the cashflow cycle.
Invoice finance is a traditional method of funding for businesses in the transport industry. According to the Asset Based Financial Association, the use of invoice finance by UK and Irish businesses has risen by more than £8 billion in the 10 years since the credit crunch of 2008.
Invoice finance can be a great solution in industries such as transport is because it’s flexible and easy to understand. Having an invoice finance facility in place can ease immediate cash flow problems and allow businesses to negotiate better terms; it releases the cash tied up in outstanding invoices, before clients or contractors pay.
On top of this, some invoice finance facilities also include a credit control service, in which the funding partner will chase payments on a business’ behalf. Having someone there to chase late invoices can relieve stress and give a business back much valued time.
Haulage businesses issue invoices on a daily basis, and having money tied up in them can slow down the essential job of operating effectively – paying wages, rent and bills. Not knowing when your invoices will be paid can also prevent business growth: for example, a company’s ability to accept a big new contract or invest in technology or equipment.
This is a central issue in transport; a peak in business may mean a company suddenly needs to find the funds to buy a new vehicle or take on more drivers, for example.
A healthy and constant cashflow is crucial to the growth of any business and covering everyday bills and expenses can be made easier once you’ve found the right funding partner. If you get this right, it can give your business the cash injection it needs to keep them heading in the right direction for years to come.