by paul | Jul 19, 2022 | News
Most new business that I have put on risk over the years has been either as a direct result of a large bad debt, a near miss or as a requirement from a bank or invoice finance provider. There are 2 examples that I would like to share with you where the prime driver was the need to power growth. Both are privately owned and one is a large corporate and the other a long established SME.
Case Study 1
The first business that we will look at is a manufacturer and distributor and is one that I have worked with since the early 2000’s. At that time, they were turning over around £10,000,000 of which 10% was export and confined to a handful of major EU markets. Fast forward to today and turnover is in excess of €100,000,000 with exports amounting to over 80% of their turnover in 100+ countries and as far afield as Nigeria and Peru. Their policy allows them to offer commercial credit limits on extended credit terms to new customers which help them become established in a new market.
When we first placed the business, the best solution was a combined export and domestic policy, however once trade started to expand outside of the EU we needed a different approach. We left the UK business with the existing insurer, who continues to provide an excellent all round service. We moved the export business to a specialist underwriter with the resources to be able to cope with both the commercial and political risks. This has enabled us to obtain prompt and accurate credit limits in new markets, often on a same day basis. We work very closely with the insurer and as their confidence in the clients credit control has grown then subject to following some basic procedures they now have the facility to set insured credit limits of £25,000 to customers in over 60 countries without having to refer to their insurance company for prior approval. This flexibility and speed of response allows order to be accepted and shipped at the shortest notice.
Whilst the vast majority of customers do pay there are inevitable problems with insolvency and slow payments. It is hard enough to collect delinquent debts in the UK, just imagine where you would start on the other side of the world, the costs and management time would be considerable with no guarantee at all of any success. Fortunately, our clients’ policy covers collections and legal costs and if they are unable to recover the money then, after an agreed period of time the insurer will simply pay the claim. Losses due to insolvency are straightforward and are paid shortly after we provide the supporting documents. Typically, a sample of the invoices and POD’s along with a transaction history for the 12 months prior to the oldest outstanding invoice.
Their expansion has been on the back of considerable ambition, drive, expertise, a great product all backed up by a comprehensive credit insurance policy and an invoice finance facility that is backed up by insured credit limits.
Case Study 2
Looking at our SME client, they are a stockholder who have been in business for over 50 years and had not used credit insurance before. They had a very good bad debt record with an established, well spread and local customer base, so why insure? They had taken on a new sales manager and he was very successful in bring in new customers, many were from outside their normal service area and the concern was on how to properly check these customers and to take advantage of the new opportunities. They tried trade references, but this was time consuming and they were missing out by being too slow to react and too conservative with credit terms and credit limits. They used Companies House data, but this lacked up to date payment and CCJ data. They could have used a credit reference company, but this would still not have properly protected them in the event of an insolvency.
After picking up an unexpected bad debt with one of the new customers for approaching £20,000 they were even more cautious and the FD looked for help and following a recommendation from an existing client we quickly put in place a credit insurance policy for them. Whilst there was some initial reluctance from the other directors they agreed to an initial 12-month trial. During that period the business exceeded their estimated insured turnover by over £1,200,000 whilst steering away from poor quality risks by only picking up 1 bad debt for less than £5,000 on sales of over £4,000,000. The business typically operates on gross margins of 40% and their premium was just over £16,000. Put another way a £20,000 order costs them £76 to insure and generates £8,000 gross profit. If an insured customer does fail then the insurer pays 90% of the debt. Based on this you will not be at all surprised that the Directors were very happy indeed with their investment and with the subsequent renewal terms. In the second-year credit limit coverage remains strong with over £2,700,000 of insured limits running for 160 customers. Smaller exposures are insured under a very flexible discretionary facility.
To Summarise
There are many other examples that I could use, however the common thread is a well structured and managed policy that helps to provide the confidence to take on new business and too increase sales to existing customers, safe in the knowledge that the invoices will definitely be paid. Hopefully by the customer, but failing that by the insurer.
If you currently have cover in place and would like a second opinion or if you are new to the market then please feel free to contact me for a strictly no cost or obligation review.
by paul | Dec 3, 2019 | News
A short article on how Credit Insurance can help expand Sales in both new and existing markets.
Most new business that I have put on risk over the years has been either as a direct result of a large bad debt, a near miss or as a requirement from a bank or invoice finance provider. There are 2 examples that I would like to share with you where the prime driver was the need to power growth. Both are privately owned and one is a large corporate and the other a long established SME.
The first business that we will look at is a manufacturer and distributor and is one that I have worked with since the early 2000’s. At that time, they were turning over around £10,000,000 of which 10% was export and confined to a handful of major EU markets. Fast forward to today and turnover is in excess of £100,000,000 with exports amounting to over 60% in 100+ countries and as far afield as Nigeria and Peru. Their policy allows them to offer commercial credit limits on extended credit terms to new customers which help them become established in a new market.
When we first placed the business, the best solution was a combined export and domestic policy, however once trade started to expand outside of the EU we needed a different approach. We left the UK business with the existing insurer, who continues to provide an excellent all round service. We moved the export business to a specialist underwriter with the resources to be able to cope with both the commercial and political risks. This has enabled us to obtain prompt and accurate credit limits in new markets, often on a same day basis. We work very closely with the insurer and as their confidence in the clients credit control has grown then subject to following some basic procedures they now have the facility to set insured credit limits of £25,000 to customers in over 60 countries without having to refer to their insurance company for prior approval. This flexibility and speed of response allows order to be accepted and shipped at the shortest notice.
Whilst the vast majority of customers do pay there are inevitable problems with insolvency and slow payments. It is hard enough to collect delinquent debts in the UK, just imagine where you would start on the other side of the world, the costs and management time would be considerable with no guarantee at all of any success. Fortunately, our clients’ policy covers collections and legal costs and if they are unable to recover the money then, after an agreed period of time the insurer will simply pay the claim. Losses due to insolvency are straightforward and are paid shortly after we provide the supporting documents. Typically, a sample of the invoices and POD’s along with a transaction history for the 12 months prior to the oldest outstanding invoice.
Their expansion has been on the back of considerable ambition, drive, expertise, a great product all backed up by a comprehensive credit insurance policy and an invoice finance facility that is backed up by insured credit limits.
Looking at our SME client, they are a stockholder who have been in business for over 50 years and had not used credit insurance before. They had a very good bad debt record with an established, well spread and local customer base, so why insure? They had taken on a new sales manager and he was very successful in bring in new customers, many were from outside their normal service area and the concern was on how to properly check these customers and to take advantage of the new opportunities. They tried trade references, but this was time consuming and they were missing out by being too slow to react and too conservative with credit terms and credit limits. They used Companies House data, but this lacked up to date payment and CCJ data. They could have used a credit reference company, but this would still not have properly protected them in the event of an insolvency. After picking up an unexpected bad debt with one of the new customers for approaching £20,000 they were even more cautious and the FD looked for help and following a recommendation from an existing client we quickly put in place a credit insurance policy for them. Whilst there was some initial reluctance from the other directors they agreed to an initial 12-month trial. During that period the business exceeded their estimated insured turnover by over £1,200,000 whilst steering away from poor quality risks by only picking up 1 bad debt for less than £5,000 on sales of over £4,000,000. The business typically operates on gross margins of 40% and their premium was just over £16,000. Put another way a £20,000 order costs them £76 to insure and generates £8,000 gross profit. If an insured customer does fail then the insurer pays 90% of the debt. Based on this you will not be at all surprised that the Directors were very happy indeed with their investment and with the subsequent renewal terms. In the second-year credit limit coverage remains strong with over £2,700,000 of insured limits running for 160 customers. Smaller exposures are insured under a very flexible discretionary facility.
There are many other examples that I could use, however the common thread is a well structured and managed policy that helps to provide the confidence to take on new business and too increase sales to existing customers, safe in the knowledge that the invoices will definitely be paid. Hopefully by the customer, but failing that by the insurer.
If you currently have cover in place and would like a second opinion or if you are new to the market then please feel free to contact me for a strictly no cost or obligation review.
by paul | Oct 31, 2017 | News
I am delighted to tell you that my son Matt has started working full time in the business. Matt has worked part time for me for several years in between spending the last 2 winters playing and coaching cricket in Australia.
Matt has been on several training courses with TMHCC and Euler Hermes and has more planned in the future. His aim is to complete his Credit Insurance qualifications and to become a fully qualified broker, he is looking to take his exams in the New Year after gaining more experience in the industry.
Matt has already met several of our clients and is looking forward to meeting and building a relationship with every client individually in the coming months. The main reason for Matt coming on board was to ensure that we maintain the very highest levels of customer service. With Matt helping me we can increase the speed in which we respond to queries, improving turnaround times and allowing me to spend more time adding value on key issues such as claims and credit limits. Matt is very keen to learn and he is already making a real contribution.
You can contact Matt either via our normal landline or on matt@phcredit.co.uk. I will be add Matt as a CC into some e-mails for training and development purposes.
by paul | Oct 31, 2017 | News
I am seeing an increase in the number of suspicious new customer enquiries across a number of trade sectors. Historically fraudsters used to prey on suppliers of easy to sell high tech goods, but I have seen a number of others looking to target most sectors where goods can be easily sold on again, anything really from food to metal. The notes below will hopefully help you to avoid being scammed.
Typically the enquiry will be unsolicited from a company that will have filed 1 and probably 2 sets of extremely good figures, normally within a very short period of their year end. These will usually be a full set of accounts with profit and loss when by size the company would only need to file abbreviated accounts at Companies House. The figures will show an impressive set of results.
The fraudsters will have registered the company 2 or 3 years earlier and will have filed accounts and annual returns. They might have missed 1 or 2 deadlines, as they will have a lot of these companies registered. If this is the case there might well be1 or more striking off notices form Companies House that will be discontinued once the filing breach is rectified. They will just have made up or copied figures in the accounts to make the figures look like a thriving business. A check on a credit reference report will probably show a strong credit limit recommendation, which is based on the fictitious information filed at Companies House. You will probably notice that although the company has been “trading” some time that the credit report shows only a recently established rating. Take great care if there are multiple searches in the last month with little or no historic activity. This is an extremely strong indication that all is not well.
The directors will probably not be listed as directors of other companies and will give the business address as their home address.
Some key points to consider when your sales team receives an enquiry:
An unsolicited enquiry with an urgent delivery deadline, they will be persistent and will put you under pressure.
They might supply annual accounts, bank references and bank statements with their credit application.
Be careful if the order is from a company based outside of your area for goods that would be readily available to them locally.
The buyer will not be too bothered about price, why should they be when they are not going to pay you!
They tend to have Gmail/Hotmail/Yahoo e-mail addresses; these are not commonly used in business.
Conflicting sectors, the company being in a different trade sector to the supplier.
Phone numbers provided will normally be mobile. Your call might well go through to voice mail and you will then get a call back within a few minutes.
Goods to be collected from your warehouse in unmarked vans or delivered to a 3rd party or freight forwarder. Carefully check orders and delivery addresses, use Google Maps to have a look at the delivery address. Phone the company head office to check the details if you are not sure.
If they have one the Web site will look OK, but will be basic and light on detail, landline, address etc. I have seen photos of famous people in the meet the team section anything from Boy Band members to International Cricket umpires.
Take care with trade references; it might well be the fraudster or their associates that answer the phone.
Check their VAT number with the EU Vat checker http://ec.europa.eu/taxation_customs/vies/
A variation on this theme is assumed identity fraud. The basic principle is that you receive an order that appears to be from a well-respected and creditworthy company. The points mentioned above apply and in addition the following are common.
I have seen a case where a Farmers co operative from East Anglia wanted a delivery of computers to an address in Tower Hamlets, sounds unbelievable? The company supplied the goods because the credit report was good and guess what?
Fraudsters also target investment or holding companies and set up an e-mail address with reference to the company name. They will look for companies with a strong balance sheet that will sail through automated credit scoring with most credit reference agencies. As the company will not have previous traded there will be a big gap between the business being set up and enquiries being made for credit checks with the credit reference companies. As the business would not need trade credit there will probably not be many references on the likes of Google.
Beware of fake websites, always search for an alternative to the address that you have been given as impersonators often setup a very convincing looking fake site. The Who Is web checker is helpful and will show when a website was registered.
Look out for spelling and grammatical errors.
Beware of last minute requests to change the delivery address and don’t change the delivery destination once goods are in transit, educate vehicle crews to deliver only to the specified destination and to report any attempt to change the delivery destination before off-loading the goods.
Be wary of orders from existing customers that do not follow their established pattern. Check the quality of purchase orders.
The golden rule is that if it looks too good to be true then it probably is.
If you do get caught out then you can unfortunately expect to receive regular enquiries of a similar nature.
There is some helpful advice on www.actionfraud.police.uk/resources-fraud-advice
The golden rule is that if it looks too good to be true then it probably is.
As losses due to assumed identity fraud are not covered by Credit Insurance policies getting caught out will be upsetting, expensive and time consuming.
