Opinion

Cash is king

The 2008 recession taught all of us in the UAE a very painful but important lesson – that cash is king. I like to stretch that a bit further and state cash flow is the most important aspect of any business. Money makes the world and your business go round. How much of it you have tied up within your company can determine how fast or how slow it spins.

As many of us have experienced over the past few years, a lack of liquidity has made investing in fleets and plant particularly tricky. Raising finance through traditional channels such as banks and financial institutions has become much more difficult than it was previously.

This has had the effect of forcing companies to reel back their spending plans and pour revenue into covering costs in the company. Some have turned to raising finance to cover their costs rather than investing in the company and this is not a viable option in the long-term.

The series of economic and financial crises over the past few years has changed many bank’s attitudes to lending money to companies in the construction sector FAMCO’s home country of the UAE. They struggled to reclaim back money borrowed to buy assets when the downturn hit and now they are unsure whether heavy equipment is a viable investment.

However as a supplier and distributor we rely on our customers to continue to grow. For obvious reasons if they can’t invest in fleet then we can’t secure new business.  To put it another way, we have learnt that the best way for us to grow is for our customers to grow as well.

But how do they expand their businesses at a time when cash can be harder to find than before?

There were a number of ways we could do it but we realised we needed to commit 100% and opened an entirely new arm to the company, FAMCO Financial Services, to deliver a workable option for our customers.

We have introduced the motto Dream bigger, work smarter for FAMCO Financial Servicesand I think it’s an approach that best sums up where companies should be heading in 2012. And it fits in with what we are trying to achieve with entering into financing.

Our customers’ businesses have moved on since the downturn and they need more from us, and it has changed the way we sell: they need us to more than just to sell a machine; they want us to tailor a solution that fits their requirement.

Consequently we have been re-shaping our operation to better suit them too. At the same time it opens up opportunities for us as long as we can help them work smarter when they do dream bigger.

We’ve put a lot of effort into the development of our service and parts operations, increasing our portfolio of maintenance agreements and other soft products, plus the introduction of our rental business, but the launch of FAMCO Financial Services is a further evolution from the way we have done business in the past.

Offering a range of tailor-made financing packages for truck, bus, construction equipment, forklifts, generators and compressors, it moves us further away from discussions about just the purchase price, and closer to our goal of developing a full solution package for our customers. For example, let’s say a customer won a bid and needed a fleet of excavators but had the cash to only pay one. We would now be able to be smart with this customer’s cash and ask him to explore FAMCO Financial Services where he can not only put a monthly payment towards his required fleet, but also bundle up a service package and insurance along with the monthly payment.

FAMCO Financial Services is a vital ingredient within a more sophisticated sales cycle servicing a more demanding customer, where value and total cost of ownership have become more important. Including financing, service contracts and insurance in a single monthly payment, greatly assists our customers with a cash-efficient solution for the operation of their fleet.

The newly launched unit utilises a multi-bank approach and offers customers the ability to conserve their capital while providing an additional credit line, while using FAMCO’s multi-bank relationships for financing. In addition to equipment financing, FAMCO Financial Services can combine insurance and service agreements in one monthly payment allowing customers a significant cash-flow advantage. Options can be Sharia’h compliant and capable of meeting the needs of an evolving and ever- demanding market.

In the business climate of 2012 and 2013 (and possibly for much longer), there won’t be many large fleets paid for with surplus amounts of cash and most companies finance that through credit lines or they may have new credit links they have negotiated. So we’re offering another credit line option for our customers and make that part of a complete package.

We’re striving to be the most customer-focused supplier in the region and FAMCO Financial Services is one element that further solidifies the relationship with customers and principals that we have built over many years. This facility takes our customer service one step further and helps customers free up their cash flow to get the machines they need. It may not be the cheapest from day one but over a lifetime it will give the greatest value for money.

The industry is learning that smart fleet management is about demanding tailor made and comprehensive solutions. The last few years may have been tough but we have learned that you have to understand what your customers want and need and we want to be pioneering the way in our offering of a total solution concept.

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