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PAYMENTS SPECIAL, part 1: Dealers reveal their cash flow challenges during the coronavirus crisis

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In the first of two payments specials, Catering Insight asked a cross section of distributors how they have managed their cash flow throughout the coronavirus crisis:

On the dealer side of the industry, cash flow certainly tightened as the coronavirus hit. However, CNG Foodservice Equipment MD Clive Groom reported: “Many of our clients are being supportive and responding to requests for payment – one major client pushed a main contractor to pay us.”

At the other end of the firm’s supply chain, Groom emphasised: “CNG has always paid everyone on time. So far we are keeping to this, and are monitoring cash flow on a daily basis to identify any potential challenges which, if they arise, we will discuss with suppliers in advance.” He praised CNG’s manufacturer network too, detailing: “We have not yet had a supplier changing our terms.”

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For BI Catering Equipment Services, MD Andrew Jones revealed: “Some customers (mainly large operations) have used the current situation to blatantly not pay invoices owing, with some being due back in February. Yet we have stuck to paying our suppliers on 30 to 45 day terms so this has impacted cash flow more than us paying our suppliers.”

Jones further detailed: “We have always had in place a 2-3 month crisis fund so we have had to call on this, but with most suppliers now paid, we are able to settle down and ride out the rest of the pandemic.”

At Exeter-based Bartlett, director John Ponsford disclosed that although the firm is now seeing works being postponed, this hasn’t impacted its financial position. “We have always taken great pride in the way we pay suppliers: this has not changed. We are in a fortunate position whereby we are well resourced and as such all suppliers will continue to be fully paid on time and as per normal terms throughout these difficult times.”

He added: “Supplier factory closures have proved a challenge when we are endeavouring to complete projects, however to date we have been able to find work around solutions.”

Elsewhere, WilcoxBurchmore MD Cathy Wilcox reported that some customers’ accounts departments are closed to furloughing. “I’ve had to argue that there must be someone there to pay the wages!” she remarked.

As the Ruislip-based firm conducts its projects on the basis of a 50% deposit, on a recently postponed job the client paid a further 40% of the bill, which Wilcox revealed enabled her to pay the dealer’s fabricator. “I’ve got a really close relationship with the majority of my suppliers. I said I’d never not pay anyone ‘willy nilly’ – if there was a problem, I’d tell them. Luckily this has never happened.”

Over at Fulcrum Commercial Kitchens, director David Burnett detailed: “We had a relatively healthy balance across our business accounts at the start of the crisis, so with careful management of available funds we are hopeful of staying very lean and lasting out.”

In terms of payments to suppliers, he analysed: “We work on the premise that larger suppliers are more able to last this out than SME operations, so we think about who is in the most need before we make decisions. Some suppliers are offering deals, but as we are also offering payment deals to our customers, those suppliers with a more draconian approach to credit control will have to wait.”

At Lakes Catering Maintenance, MD Leigh Howard said: “From the outset of the crisis I have made a conscious effort to contact all debtors to offer our support on any payments that were due or becoming due.

“While we want to remain empathic, we must protect our own cash flow, albeit in a more flexible way. I have asked our debtors to pay where they are in a position to do so – everybody’s wheels must keep turning if we are all to get through this.”

The company’s March payments to suppliers were settled as normal, and it also planned to pay April accounts in full.

Elsewhere, Hatherley Commercial Services’ MD Kirstin Hatherley noted: “We are lucky enough that we have a good level of money in the bank, which is something we have always seen as good business practice, so this should see us through these difficult times.

“I believe that we will be able to pay our suppliers, it is the right thing to do. If your customer has not paid you then there may be some negotiating to do, but on the whole suppliers should be paid as a preference. We are lucky that a lot of our customers are in the public sector so we are still receiving payments.”

For servicing firm Crystaltech, MD Derek Maher recounted: “The majority of our business is in the hospitality and retail sectors and a number of pub groups have let us know that they will not be paying invoices until they are back in full operation. Whilst the impact is significant we do have a sound trading history and by adopting prudent measures we will be able to trade through this period.”

In terms of supplier payments he reported that most have recognised “we are all in the same boat and have agreed some flexibility, but we are maintaining payment terms at the moment”.

Installation specialist Archer Catering Systems only received 30% of outstanding customer payments in March, with MD Nick Archer detailing: “I picked up quite quickly that we were in theory going to run out of money if we didn’t put a crisis management plan into place. As the hospitality sector ground to a halt, we knew this would have a major impact on our cash flow.”

Underlining that the company’s suppliers have been understanding, he added: “I have paid some in full, others have had payments on account to at least show some willing. Any account that I have not been able to pay in full I have made contact with to explain the situation.”

Trade advice

UK catering equipment trade bodies have been keen to help sector companies through the crisis. For instance, Keith Warren, chief executive of FEA, advised: “Businesses need to use the loan schemes and grants that the government have put in place – and they need to use them, at least in part, to support the supply chain.

“Operators, dealers, equipment suppliers, component manufacturers and service companies – we all need to work together, and that means acting responsibly to our suppliers. If a key supplier fails, then it will harm your own business. If there’s a payment issue then pick up the phone and talk to people.

“Credit control is going to get tighter – all businesses need to be prepared for this. Meanwhile, the government loan schemes are still evolving.”

While buying consortium Cedabond feels it is closer than any other organisation when it comes to understanding the cash flow challenges faced by dealers and suppliers. Director, Mike Nunn, explained: “One of the most important actions that we have taken is to contact suppliers, on behalf of our members, to discuss extended payment terms – from say 30 days to 60 days – and this is something that the vast majority of suppliers have been very receptive to. We are also encouraging members to have conversations with suppliers about payment plans where applicable.”

Nunn reported that virtually all Cedabond suppliers made their retro payments on time in March, while in return the buying group made payments of over £3.5m to its suppliers on behalf of its members.

Tags : archer catering systemsbartlettBI Catering Equipment Servicescash flowCedabondcng foodservice equipmentcoronaviruscrystaltechdealersDistributorsFEAfulcrum commercial kitchenshatherley commercial servicesLakes Catering Maintenancepaymentpaymentswilcoxburchmore
Clare Nicholls

The author Clare Nicholls

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