At the recent AREE convention in Atlantic City, Tracy Richmond of AVATAS Payment Solutions and Steve Abbate of Cetane Associates conducted a lively seminar on improving cash flow. Tracy and Steve proved to be a unique team since Tracy works with companies as they are collecting payments, and Steve works with companies as they are getting ready to be acquired or make an acquisition. Very different perspectives, but Tracy and Steve agree that one of the biggest issues facing our industry is cash flow.
Steve talked about how many companies in the heating fuels industry continue to operate the old fashioned way, by following procedures established generations ago just because they worked then and nobody has ever thought to change them.
There are some key processes that must be changed if a heating fuels dealer is going to improve their cash flow:
1) Change your credit terms
There is hardly any consumer in the market today that does not have a credit card. This was NOT the case even 20 years ago. Let the credit card companies finance a payment and you focus on what you do best- deliver fuel and offer great service. Consumers are used to paying for products and services when they are consumed and for some reason, many marketers in the heating fuels industry do not practice this philosophy. If you start charging customers for fuel when it’s delivered, it will become the norm and have an extremely positive impact on your cash flow. Also, DO NOT deliver a second delivery of fuel if the last delivery has not been paid for.
2) Promote automatic credit card payments
The credit card processing fees to heating fuels retailers are extremely reduced and the benefits are vast. A recent informal survey of retailers indicated that the days outstanding for receivables are averaging 45 days! You can’t wait this long for your money! In most cases you can collect that payment for less than 1 percent and have the money in your checking account in 24 hours after you make a delivery. It’s very logical.
3) Utilize electronic payments/communication methods
We are moving into an electronic world. You have many customers that want to go to your website and pay their bills. You also have clients that want to do complete self-service for ordering oil and receiving their bill. It’s imperative that your company explore all options for electronic communications or you are missing an important segment of your customer base and missing the cash flow improvements that go along with these technologies.
4) Pay for service work at point of satisfaction
Have you recently had any work done on your home, or had an appliance repaired, maybe had a contractor fix something? Did they send you a bill? Most likely not! Service calls are usually paid for when the service is performed. The homeowner is there, in most cases happy with the work completed and also probably ready to hand over payment. Why does our industry turn away this payment? We need to train our techs to complete a job and take a payment while they are onsite. Yes, it’s different and we are aware there are issues with the knowing the costs of all parts, but it can be done, it is being done and it should be done by YOU! Your cash flow will be positive from the effort.
5) Change service contract renewal dates to January
There are two key points to keep in mind with this concept. First, this industry needs the cash flow the most in the winter. If service contracts are paid in January, then you will receive the funds when you need them the most. Second, if you send out a service contract after the winter, the consumer is not thinking about how great your service is when they are cold and they really need service. It possibly gives them a chance to think about finding a company that might give them free service to switch, a thought they wouldn’t have in the middle of winter. Again, this is a new concept, but it’s a concept that has been implemented successfully by dealers across the country.
6) Put customers on a budget plan
The AREE seminar highlighted dealers that have benefited from a budget opt out plan created by Warm Thoughts Communications. These dealers worked on a carefully crafted marketing plan to communicate to their customers that unless they “opted out,” they would be moved into the budget plan. The dealers that have implemented this plan rave about the results it has had on their cash flow and the benefits of having predictable cash flow all year long.
Those are the key points, but if you would like any clarification, feel free to reach out to Tracy or Steve directly.
Tracy Richmond email@example.com, 866-849-8800
Steve Abbate firstname.lastname@example.org, 410-480-4930