- 23 Sep
You Can't Rely On A Name Like Thomas Cook
Another failure of a well known, long established company proves, yet again, that you can't rely on dealing with a "big name" to ensure that you get paid for services rendered, or products supplied. Sticking to "household names" is no longer enough to ensure that you avoid bad debts.
Thomas Cook - You Can't Just Rely On Well Known Names
The latest corporate failure, reported by the BBC today, was the holiday company Thomas Cook. After a 178 year history, this iconic company has gone into compulsory liquidation, following the failure of a rescue attempt over the weekend. Whilst the news reports focus on the 22,000 jobs worldwide (9,000 in the UK) which are now under threat, and the 150,000 stranded holidaymakers, the reports rarely mention the plight of the businesses that will have been part of the supply chain to Thomas Cook.
These companies will have been supplying everything from uniforms, to stationary, to catering etc. Everything you need to run a holiday company. Many of them will have invoices outstanding and owing to them, for goods and services rendered. These may not now be paid. They will have to file their claims with the liquidators, and wait to see if any dividend is to be paid to creditors.
Avoiding Bad Debts
The art of granting trade credit to customers has changed dramatically. You can no longer just deal with "big names" and take that as an assurance that you will get paid. The recent spate of failures amongst large, well known brands, continues to reinforce this. The list of names has been long, including many well known high street shopping brands, restaurant chains (including those owned by celebrities) and giants such as Carillion in the construction sector.
Staying abreast of the financial situation of your customers is difficult, and many companies choose to use options such as credit insurance or bad debt protection, in order to delegate this function to experts at avoiding bad debts. Payments can also slow down when a customer is experiencing financial problems, which can make the impact of a customer failing, even worse.
Bad debt protection is an option for invoice finance users. It involves the funder taking the credit risk in the case of customer insolvency, up to an agreed "credit limit". That is the maximum value of sales you can have outstanding to a customer, to remain covered. There can be other conditions such as first loss clauses, that will vary between providers. In uncertain times, the reassurance of being protected against bad debts is becoming increasingly attractive to UK suppliers, who can no longer rely on just dealing with well known brands to ensure that they are paid.
- 02 Mar
Construction Sector Protection Against Insolvencies
Construction sector companies are urged to think about protecting their cash flow as recent news reports suggest that insolvencies in the sector have increased substantially.A recent report in CityAM (10th of February 2020), states that whilst the total number of insolvencies in the UK has risen by just under 5%, the situation within the building and construction sector, is that there has been an...
- 25 Nov
How To Credit Check A Customer
Granting credit to customers is often a leap of faith so conducting credit checks on a customer can give some element of comfort to the supplier. However, even the most well known, household names can fail.Recent experience with long established brands such as Thomas Cook, Mothercare and Debenhams (to name but a few that failed in 2019), shows that no one is immune to problems that can lead to...
- 01 Oct
Mitigating The Risks Of Selling To One Major Debtor
When you land a major customer it can provide a huge boost to your business, increasing sales turnover and generating profits. However, there is another side to dealing with a major debtor, and that is the increased risk associated with your trade being concentrated into one customer.In a previous post I covered the risks of selling to a single major customer, often called a "prime debtor". These...
- 06 Dec
Hospitality And Construction Sectors Top The Insolvency Index
Looking at some figures in Business Money, published from the Creditsafe Insolvency Index, it appears that the hospitality sector (hospitality, hotels, restaurants and bars) tops the insolvency index, followed by the construction sector and then manufacturing. Worrying if you supply those trades with goods or services.Figures from the Office For National Statistics suggest that generally, the...
- 30 Jul
The Risk Of Customer Bad Debts Is Rising
The risk of customer bad debts is rising as there has been an increase in both corporate and personal insolvencies. It is time to protect your business against the risk from customers taking trade credit. Protection against taking customer bad debts is still on offer at present.REQUEST DETAILS OF BAD DEBT PROTECTIONAn article in The Times dated 28th July 2018 reported that personal insolvencies...
- 24 Apr
Factoring For Road Transport Company Cash Flow Problems As Bad Debts Increase
Coincidently, just after posting my article about transportation factoring companies, I saw an article published online by the Motor Transport publication, suggesting that bad debts have risen significantly within the road transport sector.The article sites figures regarding the road transport sector, released by Credit Safe. This statistics show that in the first quarter of 2018, while sales...
- 23 Apr
Retailageddon - Why Are So Many High Profile Companies In Financial Trouble?
Can anyone explain why so many high profile companies are having financial problems? Is there cause to worry about economic stability?I first started really paying attention to the spate of emerging problems when Carillion collapsed, the second largest UK construction firm. Watching some of the social media commentators that have an interest in the credit insurance sector. Since then there seem...
- 26 Mar
Protection For Suppliers To UK Retail Chains
If you are a supplier to any of the large retail chains, you may wish to review your requirement for bad protection following a number of recent news reports from the retail sector.More problems have emerged from the sector as the BBC report that Prezzo, the Italian restaurant chain plan to close approximately a third of their retail outlets, as part of a creditors voluntary arrangement...
- 28 Feb
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.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....
- 30 Jan
Pulse On Protecting Against Carillion Bad Debts
I had an email from Pulse Cashflow Finance, one of our funding panel, that I thought raised a great point about the recent failure of Carillion. Their clients will not be suffering any bad debts.They have included "bad debt protection" for all of their clients, including those operating within the construction sector, meaning that their clients are protected from taking a bad debt.OK, so it was...