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Reynolds Trade Credit
• Established 1912
• Specialist Credit Insurance Broker (Domestic & Export)
• One of the largest Independents
• Full client support services
• Wide range of client industry sectors
• Speciality in Energy/Non Food Retail/IT trade sectors
Key Messages
• UK Corporate Insolvencies 2000 - 2010
• The Risk Assessment Process
• Sources of Information
• Credit Insurance – What is it? Why have it?
• Major Insurers
• The Future
The Risk Assessment Process
• Information Sources
• Risk Assessment
• Customer Visits
• Identifying potential failures
Sources of Information
• Companies House• Management accounts• Trade journals• News releases and other press sources• Company websites• Customer meetings• Payment performance• CCJ’s• Director details• Rumours & relationships
Risk Assessment – Financial Statements
• Profit & Loss Account – ‘a summary of the trading year’
• Key figures: -– Profitability– Interest cover– Dividends
• Trends• Age of accounts
Risk Assessment – Financial Statements
• Balance sheet – ‘a snapshot of the strength of the business’
• Key assessment figures: -
– Tangible net worth
– Debt structure/gearing ratio
– Working capital/liquidity
• Trends in stock turn, debtor days & creditor days
• Age of accounts
Risk Assessment – Financial Statements
• Cash flow – ‘a summary of actual cash movements, not accounting rules’
• Key figures: -– Cash flow from operating activities– Net inflow/outflow after tax/interest obligations– Free cash flow – figure used by banks to assess
ability to repay debt
• Trend in figures• Age of accounts
Customer Visits
• Opportunity to obtain information and ask questions: - – Ownership– Management– Funding– Main clients– Suppliers– Future strategy
Warning Signs
• Weak management• Inadequate financial control• Lower profitability/losses• Slow payments• Fraud• Change in ownership• Track record• Late filing of accounts
What is credit insurance and why have it?
• Insolvency/Default• Export / Political Risk• Whole turnover• Principal Customer• Specific Account• Catastrophe
• Risk Transfer• Buyer Information• Pro-active
Management of risks• Improve/Standardise
Processes• Improve Bad Debt
provision/control
Major Insurers
• Traditional Market – Whole turnover
• 80% of market
• Euler Hermes (Allianz)
• Atradius (CyC)
• Coface (Bank Netaxis)
The Future???
Challenges continue……
• Fuel prices a major cause of inflation
• Government projects will run off – Public Sector is not a panacea
• Tough rent negotiations• Outdated business
models• Cautious consumers• Global downturn – if
exporting, where?
What can you do?
• Vigilant• Proactive• Processes• Controls• Minimise overdues• Consistent approach• Know your customers