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Increasing Average Age of Equipment Rental or Hire – Impact
The reasons why are:
Vendor Financing
Vendor financing has been significantly curtailed.
The Car rental industry is one obvious case in point, where the average age of even the major rental fleets is increasing.
The key reason is the lack of capital. Previously the major Car Rental companies relied on financing from the major automotive manufacturers. Such financing had been cutback substantially, for all the reasons discussed in the News and in Congress.
Bank Financing
The other form of new equipment financing has been by bank loans in various forms. The general tightening of credit from the Banks and other major institutions has meant that it has been harder to finance the acquisition of new stock. Despite being bailed out by the tax-payers around the world, the banks were reluctant to continue providing credit to Small business to fund new equipment purchases. The reason cited by some banks was that Small Business was a credit risk. (Side note: Interesting assessment by the Banks, from what I remember they were the one’s that created the GFC, they were the one’s tax-payers had to bail out – so who is the risk? )
With lines of credit curtailed many small businesses were unable to fund new rental and hire equipment purchases. Instead electing to extend the life of the equipment.
Funding From Asset Disposal
During the harshest periods of the downturn, older stock items attracted lower sales attention and hence realized sales value. Such lower values on sale for older items, meant less cash to purchase to acquire new equipment.
Furthermore, these lower sales value a further flow on effect. When the actual value received at sale is lower than the book value then the difference has to be written off. When large volumes of items or a major capital equipment are disposed of through sale the impact on the rental or hire companies balance sheet can be significant. This balance sheet impact further reduces the companies ability to borrow capital or maintain a certain line of credit from the banks.
Cash Flow
The other major financing option was through cash flow. That is cash flow used to fund (pay) for new equipment when it was on a payment plan of some description.
Secondly, the loss of the first two meant that hire and rental businesses became and still remain primarily focused on cash flow management.
Even with the Green Shoots of recovery around the World, including an Indian summer for the hire industry in the UK at present, many hire and rental companies continue to manage cash flow, primarily through cost containment.
Impacts
Therefore with an aging rental or hire equipment pool must creates a higher demand for repair, servicing and inspection. The frequency rate or intensity of inspection/ servicing invariably increases with age. But here are some tools that may help:
You Tube: That may surprise you, but You Tube can be an extremely effective in reducing equipment damage by providing a visual of how to assemble, dis-assemble or maintain an equipment. To read more on this read the article on How Rental and Hire Companies can use You Tube You Tube management is fully integrated in to HireEzy, making this an extremely simple process.
HireEzy 2.1: Includes product management functions such as equipment service scheduling, maintenance and history.
Rental and Hire’s Business Future
The one for certain is that this situation wont last forever. The hire and rental industry is dynamic and progressive. It will no doubt commence updating equipment as soon as practical.
More importantly the Hire and Rental industry is fundamental the recovery, as explained in the article Global Innovation Depends on
About Us
HireEzy is the complete business management solution for hire and rental companies. Not only does it include digital marketing, web integration it also includes social media marketing tool integration. For more information email us sales@makinglifeezy.com.au
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Improving Cash flow for Hire Rental Management Companies
Cash flow is crucial to the success of every business, especially to hire businesses and rental management companies.
Delayed customer payments can tighten your company’s access to working capital, thereby restricting your capacity for growth. This is the most common discussion topic amongst our customers – payment deferrals by major accounts and long term hires.
We use Ezidebit to manage our cash flow and payments, it has worked brilliantly for us. (please note we have no financial relationship nor related business ownership with Ezidebit.)
Ezidebit provides you with tailored payment solutions to minimise these cash flow concerns and enable your business to grow and prosper into the future. Ezidebit offers a fully automatic collection solution, suitable for regular recurring fees, variable invoiced payments or payment plans.
We have found that with Ezidebit’s direct debit payment system we have gained not only gain greater control but a real reduction in outstanding payments. More importantly we no longer have the emotional and time drain spent in chasing payments.
Ezidebit can have your business set up and signing up customers within a day.
Their contact information is www.ezidebit.com.au , phone 1300 763 256 or email info@ezidebit.com.au
About Us
HireEzy is the complete business management solution for hire and rental companies. Not only does it include digital marketing, web integration it also includes social media marketing tool integration. For more information email us sales@makinglifeezy.com.au
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The Cost of Information for Hire and Rental Companies
- Image by DeaPeaJay via Flickr
Poor Information management costs hire and rental companies money!
Given the current financial conditions, it is a cost that can be avoided.
Take a typical day
Here are some common sample questions faced in the daily operations of Hire and Rental Companies.
Does anyone know where we are up to with XYZ lead, have we sent them a quote?
• Did we email it or print it and give to them?
• Can you remember how much it was for, do you know where we saved it too?
I have a customer here who says that they won’t pay for damages because they never received the installation instructions:
• Did we send the instructions to them or did we give it to them when they collected the items?
Customer says they called us and spoke to someone here and claims they were offered an extra gas bottle at no charge:
• Does anyone know who took the call, and what was said?
I have a customer on the phone - says they submitted a web inquiry, does anyone know:
• Who got it and what we did with it?
Causes
The above examples are indicative of some of the common information management problems facing most hire and rental companies. The key causes are:
• No single point of Document Storage; and
• No workflow tracking.
How Many Places Does Your Business Store Data?
- Accounting system;
- Customer Management system (CRM);
- Mulitple spreadsheets
- Email – yours and others;
- Post It Notes;Hard copy files;
- Soft copy files – stored in various system hard drives;
- etc
How do you search to find some information if it is spread accross mulitple locations? How long does it take to find, and is it the right copy and version when you find it?
Workflow
When you allocate a task to someone, how do you do it, via email, verbal or written note. Do you rely on memory to recall who was tasked and if they had completed it?
With HireEzy the task management or workflow is inbuilt. You can find out who was allocated the task and the progress of the task.
So what are the benefits?
Well the clearest benefit is that your customer service improves, because accurate information and tracking of issues is a great way to provide customers with a consistent service level.
Secondly, a substantial reduction in wasted time, lost sales and financial transactions related to sales and returns because you have the information at hand.
Finally
There is a Latin quote, that translated means Knowledge promotes strength!
Information is a critical element of knowledge, if you have the information then you have the strength to respond confidently to customer related problems. No longer are you on the defensive with “you said” “they said”
Furthermore you are in a position to ensure that your staff are keeping on top of allocated tasks.
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Why tough times should benefit the hire and rental industry
During the tough economic periods it is worth revisting your business value as a hire or rental company, no matter what sector you service. The business value of hire and rental companies is actually at its highest during tough times, particularly those servicing the business to business sector.
So what is the business value of the hire and rental industry?
Well here are five good reasons why companies should hire from you.
Cash flow saving
Companies who elect to hire or rent equipment from you are able protect cash reserves. Rather than spending valuable cash on buying items up front, your clients can effectively defer cash outlays through period payments for the hire or rental items. If timed correctly by your client, their receipts from their customer payments from the project can help fund the on-going rental or hire payment (obviously for medium to long term hires). For those of you who have Corporate clients, hiring or renting is often perfect. Many corporate clients have capital budget constraints during a downturn. Therefore hiring or renting can be an ideal way for some corporate clients to get what they need, as hiring or renting is considered to be an operating budget expenditure. Operating budget expenditures are often delegated substantially down the corporate ladder.
True costing
For many clients hiring or renting actually aids their project costing, in turn aiding them in improving their profitability. Hiring or renting is a known cost. Whereas often supplying the equipment from their own internal assets does not enable them to determine the actual cost of the item. Many don’t know the actual depreciation (replacement) value to be assigned, the actual cost of servicing and storing the item. It may sound trite, but for many companies true costing is a major issue.
Risk reduction
Buying items also increases risk. How long is the item they buy going to be used for? Will it be needed again? Should we buy something that may last for the project duration or something that we can be used again? What happens if the item breaksdown? How long before the manufacturer can get a replacement, this can impact the project and hence cash flow. Hiring and renting eliminates these concerns.
Servicing costs and compliance
Related to the risk element above is the need to ensure that the item is correctly serviced and maintained. Many hire and rental companies, especially in the construction hire and rental, eliminate this concern by providing on-site servicing and service histories. If your hire system doesn’t do this then you really need our HireEzy product.
Minimizing Assets
Assets require maintenance as described above both when in use and when stored. This costs money, in fact in Logistics the average assigned value to store, maintain, insure and account for an item is usually 35% of its cost, depending on the equipment. Furthermore, many listed companies and larger companies use Return on Assets as a performance measure. The more they hold in asset value the greater the revenue they need to generate in order to meet this performance figure. Hence hiring or renting can actually aid them in achieving there performance targets as the hired or rented item is not considered an asset.
For many people these statements above will be blinding statements of the obvious. But are they so blindingly obvious to your customers? Renewing and reminding them of your value proposition is often a good activity in these times. Especially when many of your clients are going to look at the costs they spend with you on hiring and renting. Many of your clients will just see the dollar figure and not reflect on the benefits you provide.
If you are a party rental or party hire company the following article provides more specific how to information on this subject.
Making Life Ezy are the makers of HireEzy the world’s most innovative hire software and rental management software. We are committed to helping our clients grow through the provision of business value, such as the information provided in this blog.
A simple mind map of how to manage your hire or rental business
Some days the task list of things to do is overwhelming,
where to start, what to next, who should do it etc etc. For most small to medium business owners of hire or rental companies this is the daily reality. Stressful enough to think about as you drive to work, without the background radio comments of from dire predictions of economists and commentators.
Everyone will suggest to keep things simple, easy to say harder to do. But one very helpful way is to have a simple mental image of your hire or rental business. Here is one simple mind map.
How to use the map.
In simple terms, the reasons you undertake marketing is to create leads. Once you have a lead, you focus is on converting that lead to a sale or booking, as quickly and efficiently as practical. Managing your stock effectively is a broad term, but encompasses all things to do with your inventory, servicing, delivery and collection costs. Having the right stock, ready to hire at the right time in the right condition. Financials is an interesting one, what you do and how well you do it drives your cashflow and accounting transaction. You are in business to make money, what you do is how you make money, the two are intrinsically linked.
The final stage, manage your existing customers is often forgotten. Estimates on winning new customers range from 5 to 15 times the cost of maintaining an existing customer.
So as you drive to work, you break the broad problems you have down in to the simple stages.
Marketing to Create Leads: If your sales are declining, consider what you are doing to market to generate new leads? Thinking about it this way, enables you to quickly think about your current marketing approach. Are we web marketing effectively, or newspaper advertising etc. Where is the problem? With HireEzy you can quickly analyse your lead sources to identify problem areas. You can also read other posts on this site that suggest or discuss different marketing ideas.
Manage leads to bookings or sales: If you are getting the leads, are you getting the sales or bookings conversion, or are the dollar size of the hires relatively too low or are the taking too long. Again analysing sales using HireEzy can assist in determining where the problem lies.
Effectively manage your product assets: Such a broad area, with so many potential problems. So lets take an example problem – sales being lost because of insufficent stock. What is the cause, is there a sufficient inventory relative to current and forecast bookings, has there been a change in product demand, is too much of the current inventory not available for hire, due to servicing, cleaning or repair requirements, Where is the problem? Again use the analysis reports in HireEzy to identify the cause.
Financials driven by your bookings: What you do should drive your accounts. Not sure what your cashflow forecast is, then it is probably because your booking forecasts are not visible in your accounts. This is the most common problem facing companies who have an accounting package either separate from or being used to manage their business. Ideal for the accountants terrible for operating the business. This problem is solved with HireEzy as the accounting package is integrated into the solution. A confirmed booking creates an immediate accounting transaction entry.
Manage your existing clients: Back to feeding your market leads, are you getting word or mouth referrals or repeat business from existing customers? No, then look at some of the tools in HireEzy and the business improvement suggestions made in this blog, such as renewing old leads. Remember your customers can be your best marketers.
This mind map tool is just a way of helping to simplify you business, to make sense out of the myriad of issues and problems you face daily. Try using it and see if it helps you.
Making Life Ezy is the name of our company and the objective of our products like HireEzy, for more information go to www.makinglifeezy.com.au Available through out USA, Canada, South Africa, Australia, New Zealand, UK and Singapore.
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