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Suffered a bad debt and
afraid it might happen again?
Bad debts can strike at any time. Even global household names can fail. In the ‘worst
case’ scenario, the consequence of a bad debt could be terminal for your own business.
Smaller bad debts can still leave a gap in your cashflow; worse than that may be the
fact that you’ve lost a customer and hence their future purchases. With a 5% profit
margin, a bad debt of £50,000 will need replacement sales of £1m just to ensure your
business ‘stands still’, let alone grows!
Example: Our plc client, a provider of communications solutions across the UK
suffered a significant bad debt with the failure of a notable US bank in 2008/09.
“We always viewed our debtor book as blue chip until we suffered such a loss.
Our policy protects us from a catastrophic loss with a very reasonable
self-insurance level and a cost effective premium.” - Credit Control & Data Analyst
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Worried you’re agreeing to large credit limit
exposures that may come back to haunt you?
Most businesses will set internal credit limits for their customers and on occasion the
levels agreed can rise to levels far higher than your customer’s balance sheet would
support. This decision may fall to you and if you call it wrong and the buyer
fails you may then have the unenviable task of reporting this to the Board.
Example: Our client is a multi-million pound supplier of poultry to the main supermarket
retailers. They recognised that their exposure to the processing company (that their
birds pass through before hitting the shelves for the consumer), was uncomfortably
high and stood out as a large and concentrated risk on their debtor listing. The
Financial Director and the Owner decided to seek credit insurance cover in order to
ensure that the business was properly safeguarded and that they could both ‘sleep
easy’ at night.
"Our reasons for buying credit insurance have always been straightforward; a very
large exposure and level of concentration gave us cause for concern and we thought
it prudent to transfer this risk to the commercial insurance market." - Financial Director
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Nervous about exporting?
Whether you’re considering exporting for the first time, or selling to new customers or
into new markets, there is naturally a concern about getting paid and how to assess
the creditworthiness of these customers. A credit insurance policy will give you access
to the insurer’s extensive database of worldwide companies, and if a credit limit is
granted you can support fledgling customer relationships and build trust as well as sales.
Example: Our client, a long established carpet manufacturer keen to develop export
markets for their product, recently engaged an export sales manager. The Finance
Director had a degree of concern agreeing credit limits on companies from around the
globe with no previous experience of a business relationship. A credit insurance policy
covering the exports of the business was put in place, and has provided invaluable
expert information to support the FD, along with the Sales Manager’s recommendations,
in deciding the appropriate level of credit to be allowed.
"Our aim was to expand our sales internationally and we acquired an experienced Sales
Manager to do so. I was reluctant to agree large limits on customers I did not know but
the credit insurance limits granted made my job easier." - Finance Director
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Frustrated you’re losing sales to competitors
offering more relaxed terms of payment?
You may use more secure Terms of Payment than ‘open account’ with some customers,
and this is particularly common with overseas buyers. Do you think your existing sales could
be eroded, or are you missing out on opportunities where your foreign competitors may well
be offering open account terms?
Example: Our client is a manufacturer in the chemical sector, and supplies end customers
and distributors in some difficult export markets. They were experiencing pressure from
foreign competitors who were offering open account terms in some of these markets. We
were able to obtain cover on a very specific basis for a handful of named customers, allowing
our client to offer open account terms, secure in the knowledge that the risk of non-payment
was covered.
"Competitors from the Far East were trying to establish relationships with our customers and
despite having superior product quality and more reliable service, we needed to be seen to be
flexible on our terms of payment. The credit insurance policy has helped us to do so but at
the same time we feel we have mitigated the risk of non-payment successfully."
- Credit and Treasury Manager (EMEAI)
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Irritated the bank is forcing you to
take their credit protection?
When providing finance some banks may insist you include their credit protection. Do you
feel they exert too much control over your business? Obtaining a separate policy from an
insurance company can result in increased credit limits, thereby improving the levels of
finance available. It can also avoid the possible conflicts of interest that arise from an
invoice discounter financing invoices set against credit limits set by the invoice discounter.
Having 'all your eggs in one basket' is seldom in the interests of the customer. Leave
lending money to the banks, and assessing and taking risk to the insurers.
Example: Our client had a non-recourse finance facility and found that the credit limits on
their largest customers were restrictive, and they couldn’t draw down finance on the export
element of their ledger, hampering the company’s growth. Despite looking more expensive
‘on paper’ the credit insurance solution solved both these issues.
"Separating the credit insurance from the banking facility enabled me to judge each on its
merits and provided greater flexibility with regard to choice of provider. In addition, the
innovation from the insurer which provides additional cover where required, has provided
an immense boost to the sales performance." - Managing Director
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Already credit insured but frustrated that it’s no
longer meeting your needs?
Frustrated that the current solution no longer meets your needs? Annoyed that your
existing broker and/or insurance company aren’t listening to you? Maybe it is time
for fresh ideas, or a different perspective?
Example: Our client is a ‘household name’ that manufactures wallpaper, and invited
us in for the reasons outlined above. We spent the first 12 months working with
the existing insurer to improve gaps in the required credit limits for new territories.
Despite this effort we brought a competing insurer to the table who won their
business, through agreeing difficult credit limits in difficult markets, based on scarce
financial information but positive customer relationships and background. Where this
insurer was unable to cover some markets, we were able to bring the export arm of
the Government in to help. Facilitating
safe exports for our client saved jobs in the
North West.
"Atlas Risk have more than proved their worth by increasing the level of cover across
the ledger, particularly in those existing difficult markets where there was insufficient
cover in the past, and challenging new markets like Libya." - Chief Executive Officer
