How well do you really know your customers?
Pretty well you might think. You think they’re financially secure. Maybe you’ve been trading with them for years; they are large, well-established companies; they always pay on time. Unfortunately none of these factors can provide the full picture of the health of your customer’s business.
There were 14,629 company insolvencies in 2015* and research shows that it is established accounts that pose the greatest threat, with over 50% of all UK insolvencies involving established, prompt paying customers. Size or ‘blue chip’ status is no longer a guarantee of payment. Nor is past trading experience a reliable guide to the future - in several recent cases companies were paying on time even up to the day they failed.
How could bad debt affect your business?
Imagine one of your customers went into insolvency and couldn't pay you...
- How would it affect your business, cash flow and staff?
- How would you get your money back?
- How would you make up for lost profits?
Each year the average company will lose three of its active customers due to insolvency. In 76% of cases, you will receive nothing back if your customer goes into liquidation.
How can you grow your business with confidence?
If your business has £500k or more of annual turnover conducted through credit accounts, the sales ledger typically represents 40% of your company’s assets. This sales ledger is an asset that needs to be protected. With trade credit insurance you can safeguard your business against the failure of a customer to pay their trade credit debts, allowing you to maintain cash flow and continue to grow profitably.
Watkin Davies has teamed up with the global leader in trade credit insurance, Euler Hermes, to provide a service that not only helps to mitigate your risk of bad debt, but also allows you to learn about your customers and prospects to help spot opportunities and avoid losses before they occur.
Utilising Euler Hermes network of global intelligence and information obtained from in depth interviews with local risk analysts, your customers’ company performance is constantly monitored, providing objective early warning on deteriorating risks. After analysing the data, each of your trading partners is assigned a grade, which predicts the probability of a default in the next 12 months, providing your business with a valuable insight of what lies ahead.
Knowledge brings opportunity
Credit insured businesses have been proven to be more profitable than those without credit insurance**. When you have access to quality intelligence on new and existing customers you can grow your sales safely and strategically...
- Enhance existing customer relationships and become more competitive by safely raising credit limits or offering better terms
- Target new creditworthy prospects
- Approve credit limits more quickly to increase revenue opportunities
- Obtain more working capital (often at favourable rates) since insured receivables translate to insured collateral
- Offer competitive terms overseas so you can sell more to foreign markets.
Take advice from the Dragons’ Den
In a Radio Two interview with DJ Chris Evans, Dragons’ Den Entrepreneur Peter Jones cited failure to take out trade credit insurance as the ‘biggest business mistake’, which cost him everything.
“I was 28 and running a business, doing really well and I had everything and somebody came to me and said ‘do you know what? You should take out credit insurance’, and I said, ‘credit insurance? I don’t have businesses that go out of business, I’m doing alright. I manage my business, it’s all good’.
“For twenty five or thirty thousand pounds I could have taken out credit insurance. Within 12 months of that decision, at 28, I lost everything. I had seven of my largest accounts go bust owing me millions... I lost the business and I ended up literally sleeping in a warehouse for four months. Without a house, without a car, everything finished. So I know what it’s like to build up, have nothing, literally, and then start again at 29.”
*2015 Insolvency Service official statistics
**Source: Credit Management Research Centre
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