BM dealers are getting paid several days later this year than in 2007 despite working harder on collections, a new ProSales survey reveals. Dealers that took part in the online poll, conducted in September, reported their average days for accounts receivable rose to 48.9 days in August from an average of 45.4 days in all of 2007. This came despite the fact that 34% said they are spending significantly more time on collections now compared with autumn 2007, and another 39.6% said they were slightly more engaged.
"This year alone, we have sent to collections or placed liens more than all other years combined since 1989," one participant wrote.
"Payments are a bit slower but collectible for the most part," said Frank Pascrell, general manager of Maresca Lumber and Building Materials, Pequannock, N.J. "It's like tending to a sick person day in and day out."
Among the findings:
- Close to a quarter of the customers who get slapped with a service charge for late payment of their bills refuse to pay that charge, dealers said. About one in 10 customers refuse to pay any fee the dealer imposes for paying by credit card.
- Almost 42% of dealers have increased their bad-debt reserve this year, typically by 30%.
- Nearly half of all dealers have tightened their accounts receivable policies this year.
- Half the dealers said their companies have increased the time and effort spent on collections.
- Roughly four out of 10 dealers have hired a collections agency.
Anecdotally, some dealers said they were having success keeping payments from being stretched out by requiring quicker payment: within 15 days of receipt of a bill, for instance, rather than 30 days. Others said they've been helped by hiring a receivables management company (something that only one out of every 20 dealers use). Dealers also reported they were quicker to cut off giving future credit when payments for current bills slowed. "[We're] much stricter, and we now verify financing on all pre-solds," said one dealer in the upper Midwest. "Too many deals have fallen through in the past."
On average, dealers require that a bill be paid in full within 33 days, but some permitted as many as 75 days. Last year, most payments tended to come in roughly 41 to 45 days after billing, dealers said. That time stretch still is the most popular payment period, but now several dealers say they are more likely to get paid 56 to 60 days after billing. (See chart above.)
"A/R has become a major issue for our company," said Glenn Bunce, general manager of Little Falls (N.Y.) Lumber. "Cash flow is always tight at certain times of the year, but this year our receivables have kept us in a place where we can't take advantage of buying opportunities, etc. Also, it seems many more accounts are falling behind as far as timely payments go."
"Our customers are in denial about their own financial health," added a Maryland dealer. "Thus, we must be very aware of any warning signs and act promptly to secure our A/R."
What bothers David Stordahl, owner of Triple S Building Center in Butte, Mont., is people failing to follow the terms of their accounts. "Some people even get indignant when you send them late letters," he said. "I really don't see a change in this attitude: 'I want it now, I'll pay you later when I figure out where the money is coming from.' "
There were 206 respondents to the survey, 137 of them dealers. Twelve molding and millwork companies took part, as did 12 short-line specialty companies, 22 building material wholesalers, and 20 people who listed their businesses as "other." Three others participated but didn't identify themselves.