• Maplin Electronics & Toys R Us Enter Administration

    Two more large company failures on the BBC news this morning - both Maplin Electronics and Toys R Us have entered Administration.

    Maplin Electronics & Toys R Us Enter Administration

    Administration is an insolvency process whereby a firm of insolvency practitioners, the Administrators, take over the running of an insolvent business (one that cannot pay its creditors as they fall due), in order to maximise the returns for creditors of the business. An Administrator may choose to move the company into liquidation, or they may trade some aspect of it forward, for example, to maximise returns for the creditors. Seeking sale of the business may also be within the remit of the insolvency practitioners handling the case.

    So these are two more large, well known names entering insolvency procedures, from the retail arena. These may be two more instances of small suppliers facing potential losses, as a result of large companies, that are their customers, failing.

    Carillion Bad Debt Protection

    These failures, although from different sectors, follow my recent comments about Carillion and how some of their suppliers have need additional support in order to survive the loss of business and possibly income from outstanding invoices. We also reported how some customers, that had the foresight to use bad debt protection products as part of funding packages have avoided the financial impact of any losses. The example of Carillion related to the construction sector, but these protections are equally applicable to all industry sectors - and could have included protecting you against losses associated with the failure of Maplins and Toys R Us.

    Again, these failures highlight the risks in dealing with debtors who are even large, well known names. Having worked within the factoring industry for many years (including time as a Credit Underwriting Manager), I have come across numerous businesses who don't run any credit checks for new customers that are "well known names". Unless you take an active interest in the financial shape of these large companies, you may not have been aware that these failures were looming. Indeed, the Carillion example taught us that relatively recent accounts showing profitable trading are not even sufficient to ensure your safety when granting trade credit to customers. This is where the credit underwriters behind bad debt protection come into their own. They keep an eye of these types of issues and monitor for potential problems with customers, so that you don't have to. Even if they get it wrong, providing you trade within the credit limts that they set, you are covered in the event of a customer insolvency.

    Time To Review Your Bad Debt Protection Status?

    Now is the time to review your credit protection status, before the next unexpected customer failure. It might be another large, well known name or even a small company that you deal with that is likely to be even more sensitive to a downturn in trading or market conditions. Call Sean on 03330 113622 or contact us for a free discussion about bad debt protection.

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