According to an article in the Wall Street Journal yesterday, a machinery glut is changing the way construction companies secure their equipment. The article describes how customers are turning to rental or leasing instead of buying new equipment. Rental companies buy 50% of the new equipment in the U.S. and analysts see that climbing to 60% within the next 5 years.
Sounds great for rental companies, right?
Well, maybe not, the article goes on to suggest that contractors may be more likely to lease that rent if motivated. Leasing equipment for a year or two can be about one-third of the cost of renting. And with manufacturers needing to move their product, they might focus on driving leases. Both John Deere and Volvo credit departments are leasing more than in the past.
So what are some ways that you can keep your rental revenues flowing regardless of what happens with a glut of equipment?
Hit the money is the term used to determine the optimal time to bill a customer for their rental. Most rental companies give renters a break on charges for renting a piece of equipment for a month rather than a single day. “Hitting the money” means you invoice the customer as soon as the rental revenue has been earned rather than waiting for the end of the month.
For example, if the monthly rate is 3 times the weekly rate, invoicing the customer after the 3rd week rather than waiting until after the 4th brings in cash sooner. You can recognize that revenue sooner and get it billed and paid sooner.
Make It Easy to Pay
Encourage fast payment through an easy to use customer portal. Make it easy for your customers to pay via credit card and provide a tool where they can see all outstanding balances, due dates, and job detail. Don’t delay the process with back and forth emails, paper invoices and checks in the mail. Make it faster through your portal and maximize your cash flow.
Maximize Your Sale
There are a number of additional charges that you should consider to add to your base pricing. From the traditional damage waiver to cleaning costs and environmental fees. And don’t forget to sell ancillary supplies with the equipment like safety vests and hard hats.
Adding Services is another great way to maximize your sale. Adding a certified driver, supervisor or inspector to the equipment rental is a good way to boost your revenue and differentiate you from a manufacturers lease. Be more than just an equipment provider to your customer, be a partner in the overall project.
Position your business to compete with the looming pressure of increased leasing by making sure you are operating as efficiently as possible. Having the right back office rental software is one key to maximizing operational efficiency and driving revenue. The right ERP is the backbone of your business, learn why half of the leading rental branches (RER 100) in North America trust Wynne for their ERP solution.