When you look into giving a customer credit, how deep do you look into their current financial strength?
How far into your customer’s finances do you go? How often do you go back and look again? And when you’re not looking, who is looking out for you?
With a Credit Insurance policy, you not only know who is good and creditworthy but also who to avoid. Trade underwriters are constantly watching your customers to forewarn you if things start to go wrong. Likewise they are also able to let you know which customers are getting stronger financially and therefore where the business opportunities are.
Credit Insurance isn’t about bad debt. It’s all about growing your business with growing customers and making profit.
There is a lot more to Credit Insurance below the surface.
A Cautionary Tale.
In my world of business amongst the numerous sayings and tales is “the person you really need to know is your customer’s bank manager”.
A new introduction to me has highlighted this saying, “They were one of our top 5 customers. I never had any concerns about them. Didn’t have an upper credit limit on them. Always paid on time, never any problems. Until out of the blue they went bust. Took me for £26,000. My only comfort was they had just paid me up to date.”
This is backed up by two clients both reporting customers who have simply shut up shop. “We’re closing down, can’t afford a liquidator, that’s it” said one in a letter to suppliers. The other has simply done a runner. Luckily for these two clients they will be getting 90% of their debt back. It often happens that more companies go bust as we trade out of a recessionary period than went bust going in.
Know your customer, know his bank manager even better.
Know your customer – who are you selling to?
Following a recent review of a prospective client’s credit insurance arrangements an all too familiar problem raised its head – “knowing who you are dealing with” or as I call it “exactly who is principle to your contract of sale”.
It is so important to make sure you identify exactly who is the correct legal entity you are selling to. Ultimately if it all went wrong, who would you sue in court to recover your debt?
In this case, as in many others, they had been invoicing the trading style of the business and not the legal entity behind the name. If you haven’t got it right, you will have difficulty proving that you have a debt with the real customer. I’m so often told that “we don’t like to ask in case it offends them”. Getting it right at the start when opening a customer account can save you so much heart ache later on. Asking your customer is both professional and something they no doubt ask their customers when selling on credit.
I’ve done the exercise on behalf of a client to clearly identify who they were dealing with. I got chapter and verse from the customer’s accounts department as to who was the legal trading company. They said if the invoice isn’t right then it slows up their payment runs.
Asking the question, getting it right can save time and money.
Something Free for you
If you would like a quotation for UK and Export Credit Insurance along with a review of the credit worthiness of your Top 10 customers, contact me, Simon Moulson (04123 860831) or email simon@tradecreditsolutions.com with the completed questionnaire and let’s talk.