Invoice Finance Case Study – The UK Camping Industry

Camping has overtaken bed and breakfast stays in popularity for the first time, with at least 5.4 million families expected to make the most of the hot summer* by sleeping under the canvas this year.

According to official figures backed by a UK Tourism Survey and commissioned by the Office for National Statistics, a total of 5.43 million camping trips were made last year, which is an astonishing (recession proof) increase of 29 per cent on the year before. For the first time, this number overtook traditional bed and breakfasts, which attracted 4.98 million stays in 2009.

The hot summer initially forecast for this year, which the Met Office said was still on track to be the sunniest since 1976, is still expected to send this figure up much higher, possibly over 6 million, when the figures are made available. The trend for camping has also been helped by the after-effects of the recession, the falling price of camping equipment, and the higher cost of foreign holidays, especially during the school holidays, which is further compounded by the weak pound.

At Factoring Finance, we have seen a surge in activity in from the UK camping sector as the industry tries to cope with the demand and reduced cash flow positions as the lag between sales and getting paid has increased.

This summer, campsites across the country where full and despite July being one of the wettest months on record in the North West, camping and canal boat holidays were as popular as they had ever been. This upturn in activity across the UK camping/caravanning/boating holiday sector was a perfect example of how Invoice Finance products such as Invoice Discounting and Invoice Factoring can aid rapid growth.

Whilst retailers were ordering unprecedented levels of stock from camping supply and outdoor equipment wholesalers, many were stretching out the payment terms as far as possible to take advantage of their own improved cash flow positions, and order more stock before the end of the summer season saw the drop off in activity.

The net result was that the demand for invoice factoring and invoice discounting from the outdoor equipment wholesalers was outpacing many other industries. Many outdoor equipment retailers operate online and have settlement periods with their merchant providers (card payment processor) ranging from 3 days after the sale for established businesses, to 45 or even 60 days for the newcomers.

This condition imposed on the outdoor equipment retailer from the merchant provider effectively means the retailer is victim to indirect 45 day invoice terms.

That the customer has the money for their purchase go out of their bank account hours after purchase is irrelevant. The long settlement periods are to reduce risk to the merchant and the merchant holds on to the sales proceeds until the pre set settlement period had expired for that sale.

Just like business to business sales with 45 day invoice terms, in this scenario the retailer has the value of all the last 45 days sales tied up in merchant payments. Whilst this maybe manageable after the initial 45 days and with level sales activity, such terms severely hamper the ability to grow or for the retailer to benefit from sales surges. The retailer effectively has a 45 day reaction time to anything above the norm.

This had a knock on effect across the industry this summer as everyone from logistics firms transporting goods, manufacturers making them and wholesalers being the last line to the retailers, all of them were effectively having their invoice payments stretched out by the surge in sales activity and resultant rush to meet added demand from the retailers.

As one can expect, the pressure on cash flow is immense under high growth conditions and/or sales surges and many firms (unable to secure overdrafts) turned to Invoice Finance products such as Invoice Factoring and Invoice Discounting, to get the value of their invoices unlocked and benefit from the upturn in trade.

*hot summer – granted, we didn’t think it had been either

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