Credit where credit’s due
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There has been a lot of bad debt incurred this year. We look at how fuel card suppliers and hauliers are coping if payments go wrong.
IN JUST a few days time, on 1 September, fuel duty will rise again by 2p/litre, marking the third increase in just nine months. While the arguments for and against fuel duty rises are a separate issue (don’t forget to vote in our industry-wide survey at www.roadtransport. com/fueldutysurvey), a sure-ire way to keep your fuel costs down is to shop around for the best deals on fuel cards.
But with so many hauliers struggling with cash low and credit limits, it is a tricky time to be a fuel card provider, be it of bunkered or retailed fuel.
While the fuel card companies are not banks, and don’t offer credit limits, they can still ind themselves on the back of serious debts incurred by companies struggling to keep on top of their cash low situation.
This can lead to serious consequences for the haulier. Take, for example, the case of Tamworth haulier K Freight UK Limited. The irm, which has three vehicles on its O-licence, was subject to a winding-up petition on 27 July by The Fuelcard Company.
The petition was yet to be heard as CM went to press, so it is dificult to ascertain the level the creditor claims, but this is illustrative of a wider picture, where fuel card suppliers are often one of the more prominent names on a list of creditors for haulage businesses that are entering liquidation.
Bad debt
The Fuelcard Company marketing director Jakes de Kock says: “[Credit] has been a big issue in the haulage and transport industry this year. It has been the same in the construction sector, where we have a lot of customers as well. There is a large amount of bad debt that we have had to write off.” Hauliers pay for the diesel purchased through fuel cards on a weekly basis, most commonly via a direct debit.
Similar to consumer inance, a missed direct debit will have consequences for the haulier looking to shop around for its fuel purchases. If a haulier is facing cash low problems, a simple credit check on a irm’s trading history will stop that business from moving suppliers and taking advantage of the best prices on the market. The issue can be further compounded if the irm has County Court Judgments (CCJ’s) standing against it.
This problem is shared by all suppliers to the industry. Steve Clarke, general manager at The Fuelcard People, tells CM: “One of the biggest
problems fuel card companies face is that once the customer has drawn the diesel, there’s no way of getting it back.” He adds: “If a haulier is having problems, they should be talking to their bankers and making sure their credit lines are fulilled. We are not set up to offer extra credit lines to our clients. We’re not there to provide loans, we are there to provide a means of buying fuel. Finance should be left to the bank.” Yet problems have occurred as the inancial status of hauliers continues to change throughout the recession. If a bank cuts a small business’s overdraft, then a direct debit for a fuel purchase can bounce, leaving it in trouble.
Fuel card companies are insured against bad debts, but mounting debts on purchases such as fuel are not the best way for hauliers to build up a irm.
Over the worst of it
Clarke says this problem was at its peak between October last year and March of this year, but as credit has returned to the banking system, the issues have eased.
One operator, posting on the forums of TiuckNet UK, who wishes to remain anonymous, reveals: “Credit is getting harder and harder to obtain for newer companies and those that have had a particularly bad year. New companies are not getting touched with a barge poll and rightly so, they are too high a risk, but the issue can be overcome with bonds, guarantees and such like.”
The price of fuel and keeping costs down is still a major issue for those hauliers that decide not to bunker their own diesel.
John Small, of John Small Transport Services in Bristol, says: “Fuel card companies are very well known for their rate variations. I use three different fuel card companies: Texaco Fast Fuel, ReD Fuel Card and Abbey Fuels. Every week Abbey Fuels is the cheapest, and every three or four weeks I will get a call from Texaco to ask why I haven’t been using its card.
“I tell [Texaco] it’s the rate it’s charging. Then it asks how much I’m being charged by other fuel card suppliers and says it will match their prices.
“If only I had the luxury of knowing what my competitors were charging and then telling my customers I will match their price. Fuel card suppliers make you feel like they’re supplying you with cheap fuel. It looks cheap without the VAT put on, but when you add the VAT to the net price, nine times out of 10, you’re paying more than pump prices.”
It all comes down to the fact that the haulier wants to stay competitive. Working closely with bankers and fuel card suppliers will ensure you won’t join the list of those facing serious consequences after struggling to pay for fuel. ■
Market consolidation
Earlier this month global fuel card business FleetCor, the business behind The Fuelcard Company, acquired the UK and Ireland operations of Retail Decisions (ReD), the company that supplies the Road Haulage Association’s fuel card.
The acquisition includes ReD’s network of UK fuel bunkering outlets, and will add 15,000 new business fleet customers.
FleetCor Europe chief executive officer Andrew Blazye says that the deal demonstrates the firm’s “continued commitment to the UK and Ireland, and will provide significant benefits to our existing and new customers and partners via a larger acceptance network”.
Carl Clump, chief executive officer of ReD, adds: “FleetCor is a leader in the UK fuel card market, and will make a logical home for our UK and Ireland commercial fleet card customers, partners, and employees.”