by paul | Feb 21, 2025 | News
I was reading in yesterday paper that insolvencies in January 25 were at the highest level since the financial crisis in 2009 with nearly 2,000 business failures. This mirrors what we are seeing in our own business where we have approaching £3,000,000 of gross claims submitted in the last month and whilst a seasonal peak in the New Year is pretty much the norm this is by far the highest figure that I have seen since I started in the credit insurance industry. The 2 things that have struck me are the speed of the failures and that in the majority of cases they were well rated and the type of risk that would have left us scratching our heads had we not been able to obtain cover.
In one case a €1,500,000,000 European group applied for a winding up petition on their UK sub and the directors beat them to it by placing the business into Administration, I have never seen that before, which does just go to show that you are never too old. Their rating was very strong indeed, with very significant amounts of cover available and this failure came right out of the blue. This made me think about a recent new business case where the decision was to not take up our recommendation of a premium rate of less than 0.20% of turnover and to rely instead on credit reports, which is OK from a cost perspective, but as we are looking at companies in our £3,000,000 that were well rated it will be a sorry about that from the credit report provider and 90% of the money back from the credit insurer.
It is to the credit of our underwriting partners that they are holding their nerve and supporting our clients at what is a tricky time, it is a fine line between their own profitability and then being so tight on their underwriting that no one would want to either renew or buy a policy that was full of refusals and cancellations. There has to be a balance in helping to steer away from poor looking risks whilst providing the peace of mind for the business owners to sleep at night and then have the confidence to take up new opportunities, safe in the knowledge that they will be paid.
We have seen some excellent claims service with large claims agreed and paid quickly and within days of submission on a large 6 figure settlement that would have caused serious cashflow difficulties for a longstanding client, who had previously only ever seen modest claims.
A couple of thoughts to finish with, firstly that within our £3,000,000 of claims, the failed companies were not so very long ago someones blue chip customers. Secondly a message for any uninsured companies is to get in touch and we can have a chat on how or if we can help to mitigate bad debt risk and at the same time to enhance their credit management and put something in place to help to safely support profitable and sustainable growth.
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.
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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.