Plan against New Year business woes warns Trade Credit Insurance chief

Nigel Birney head of Trade Credit Brokers has warned that now is the best time to consider financially protecting your business with trade credit insurance

The head of specialist Credit Insurance intermediary Trade Credit Brokers, Nigel Birney, has warned that now is the best time to consider financially protecting your business with trade credit insurance before the realities of the New Year kick in.

This comes ahead of the expected post-Christmas slump that many businesses will face which often puts them under significant financial distress. Businesses right across Northern Ireland are likely to see increased levels of insolvency, a slowdown in the average number of days it takes to settle invoices and projects put on hold, as trade credit risks are exacerbated in the early months of 2018 and the uncertainty created by Brexit affects business confidence.

The impact of bad debt, caused by the failure of customers to pay for goods or services sold on credit can be crippling for some businesses. But there is one key way in which businesses can proactively manage their credit risk and take away New Year anxiety – Trade Credit Insurance.

Nigel Birney, Head of Trade Credit and Political Risks, Trade Credit Brokers, said today:

“Not only can the months of January and February be slow in terms of sales and trading, it is also a crucial time to make sure that your invoices are paid, and paid on time, in order to avoid major cash flow difficulties.”

“It can only take one business in a supply chain to suffer a bad debt to create unnecessary financial difficulty and this, coupled with rent payments falling due, staff being on holiday and other seasonal pressures, resulting in a potentially catastrophic situation which lands at your own door.”

“The recent high profile collapse of Palmer and Harvey, which, according to the Association of British Insurers, will result in over £100m of Credit Insurance claims being paid to trade creditors, is a good example of how a range of businesses in their supply chain protected themselves by having Trade Credit Insurance in place therefore preventing more companies being adversely affected. Some of these companies may also have failed as a result of the contagion effect. This is a good lesson for those who think that they might be immune to such a black swan type situation.” (A Black Swan is an event, positive or negative, that is deemed improbable yet causes massive consequences).

“If a company is fortunate enough to operate on a 10% profit margin and suffers a trade debt of £10,000 they will need to make additional sales of £100,000, just to recoup the lost capital. That will take lots of hard running in early 2018 to recover and is something that can be avoided right from the start with the appropriate Trade Credit Insurance policy in place.”

“Trade Credit Insurance is no longer a one size fits all product as there have been many new innovative products added in recent years by all the main Credit Insurance underwriters to meet the changing needs of the market in order to align cover with the policyholders credit risk requirements. An example of this is a recently launched SME specific Credit Insurance policy which has many additional key benefits such as providing market intelligence on prospective customers and improving access to trade finance, as well as providingbusinesses with protection against the negative financial impact caused by an unforeseen bad debt. We encourage any business that wants to eliminate the credit risk exposure they might be under in the New Year to make sure they speak with a specialist Credit Insurance intermediary before it’s too late.”