Can invoice finance work in Agriculture

Primary producers have enjoyed the fastest invoice payment times of all business sectors in Australia since 2015, according to industry analyst, illion (formerly Dun & Bradstreet). However, the agriculture sector experienced a sharp 3.2% decline in invoice payment times during the December quarter in 2017.

As if our farmers don’t have enough uncertainty, late invoice payments must certainly add to their stress.

And where would we be without them?  According to the National Farmers Federation, there are approximately 85,681 farm businesses in Australia, 99 percent of which are Australian owned and operated. Each Australian farmer produces enough food to feed 600 people, 150 at home and 450 overseas. Australian farmers produce almost 93 percent of Australia’s daily domestic food supply.

As with any industry, when cash flow in the agricultural sector becomes strained because of late payments, farmers face a number of substantial business hurdles.  It can hamper their ability to increase stock, pay suppliers, pay wages and effectively manage their growth.

We only need to look to Victoria and the recent dairy crisis, when processors cut milk prices, to see just how thin many farmers are already spread when it comes to paying their creditors. One or two delayed payments could mean serious financial trouble for some farmers, or to cause the banks to come calling.

Can’t farmers just extend their line of credit?

In theory, yes, but many farmers are already at maximum credit capacity. According to figures from government agency ABARES, in the 2016-17 financial year the average dairy farm owed banks $937,600. In such instances, it’s difficult to see the appetite – for both the farmer and the banks – to take on more credit risk.

Invoice finance can’t solve the weather, improve milk prices or replace a business’ capital funding, but it can be a good tool for farmers, producers and growers when they rely on cash flow to invest in new crops or livestock, pay wages and suppliers on time, and help fill their future orders.

How can invoice finance help?

Invoice finance is not a loan, which means businesses who draw on the services of an invoice finance company aren’t talking on further debt. Invoice finance simply provides a way for you to receive upfront payment for your invoices, rather than allow your customers to destabilise your cash flows when they delay their invoice payments to you.  So, if you have a client who continually delays their payments to you – say for 30, 60 or 90 days – an invoice financing company can ensure you receive faster payment.

At Apricity, we can pay up to 95% of your invoices upfront, which provides you with greater cash flow certainty. We may also pay a further 2% of the invoice amounts to you if your customers pay us for those invoices within 30 days.

Benefits of invoice financing for farmers, producers and growers

Invoice financing is flexible and agile. Customers of Apricity can choose which invoices they want paid, and when. They are not locked in to any contracts and can call on Apricity whenever they wish to ease cash flow pressures.

And, as the illion report suggests, payment times generally in Australia are improving. That’s a situation we welcome, and also adds weight to why our product is flexible. It puts you in control, allowing you to decide when it’s appropriate for you to draw on our services.

The ability to have your invoices paid upfront can put you in a better place to pay your workforce or suppliers on time, while creating greater predictability around your revenue flows, allowing you to spend more time on doing what you do best, or planning to capitalise on growth opportunities.

You can read here some of the features of our invoice finance facility, which help set us apart from the offerings of banks and other providers.

If your business requires better cash-flow management, we may be the solution to your problem.  To help determine your eligibility to become an Apricity customer, read here.

Our invoice finance solution provides businesses with high credit quality customers a flexible finance facility that grows with your business. Talk to our team today about how we can help – Australia 1300 277 424 or New Zealand  0921 88 200.