An ever more aggressive attitude toward late payments helped LBM dealers limit the increase in average accounts receivable to just one day this year from 2009, results from a just-completed ProSales survey indicate. The poll also found, however, that dealers are experiencing similarly tougher tactics from their banks in the form of shrunken credit lines and increased demands for collateral.
The dealers and wholesalers nationwide who took the online poll that concluded Tuesday reported their average A/R days rose to 45.7 this year from 44.7 in 2009. That contrasts with the past three ProSales surveys of dealers--which aren't completely comparable, because the groups polled were different--in which respondents reported slowdowns of 2-1/2 to 4-1/2 days between one year and the next.
Just under half the dealers said they had changed their accounts receivables policies, typically by being vigilant to spot late payments. "A new customer or one who we feel could get strung out is followed closer than white on rice," one dealer said."[We] made our company appear more often and higher on the 'pay first' lists of our customers," said another dealer. "Pester, pester. Lien quicker. Reduce credit limits until a customer can manage."
Just under 30% had increased the number of liens they were issuing compared with 2009. Still, 26.6% of dealers said they had increased their bad debt reserves this year; the average increase was 34%.
"We started calling a lot more frequently and are asking tougher questions," a dealer wrote. "Just like our banks are to us."Indeed, 29.5% of dealers said the credit line with their bank has been cut this year, typically by 30% to 60%, and 30% said their bank has required additional collateral. Roughly 23% of dealers said they have had to find other means of financing aside from a bank credit line.
"We use a local bank that has always been fair and easy to work with ... until last August," wrote one dealer, who like all others was promised that no personally identifiable information about him would be released. "First [they wanted] more collateral, then once they got it they cut the line of credit. Then they refused to renew short-term debt. During this six-month period they also required extensive financials DAILY. Banks are not the sole cause of the current meltdown but ARE the main reason we can't recover."
Even while facing problems themselves, dealers said their builder customers were having it worse; 89.4% said their customers were finding it harder to get bank loans this year compared with 2009. That may be one reason why 35.5% of the dealers said they had spoken to a bank on behalf of a builder or remodeler customer that was seeking a loan.
"There is no banking," another declared. "Banks are keeping away from housing and the construction business. Banks don't want to deal with you anymore."
ProSales conducted the online survey in the second half of August. It received a total of 228 responses, of which 185 were from general building material dealers, specialty dealers, and molding/millwork firms. The rest of the responses came from wholesalers, manufacturers and "other" respondents. The percentages cited in this story were taken solely from the dealer responses.
Survey participants will receive a copy of the results that includes all written comments. A general summary of the results will be published on ProSales' website. To see results of past ProSales, visit our Surveys collection.