Hopefully the early post credit crunch years taught everyone a lesson about debtor quality but it’s always worth some revision.
There has been a period of relative calm on the high street since the parade of big names toppled into the abyss. The likes of Woolworths, MFI, HMV, JJB Sports, Comet, Blockbuster and Phones 4U were all no doubt considered to be far too established by many suppliers to require any contingency planning for non-payment.
Hindsight is a wonderful thing
Of course, those with a bad debt protection facility in place would have been cushioned from the blows and given a sharp reminder of the true value of paying the premiums. Those without would have seen their cashflow forecasts heading south at pace.
The recent problems at Matalan, for years the darling of cut price fashion and homeware goods, will no doubt bring a slight tremor to the hands of anyone with a truck load of gear en route to one of the store’s warehouses. On top of the news that the company has voluntarily put itself into the special measures division of Lloyds Bank comes further news of a downgrade in Moody’s rating based on profit concerns.
It ain’t necessarily so
It must be stressed of course that the decision by Matalan may well be a very prudent and sensible thing to do; recognising a potential problem and taking corrective steps could make all the difference if indeed there is a problem. One bank insider is reported to have said that it could be for “all manners of reasons” and did not necessarily indicate distress.
But just in case..
If the financial crisis has taught us anything it is that tough times have no respect for how many stores you may have or how blue your chips might be. Protecting your business from all of the possible horrors that a large unpaid invoice could trigger should be given serious consideration at every operational review.
Bad debt protection is widely available these days. It is commonly used in conjunction with an invoice finance facility with services providing protection of up to 90% of any loss suffered by reason of the failure of a debtor to pay, owing to insolvency or protracted default. With cover available across the whole turnover of a seller, or just on selected debtors, there is enough flexibility in the products to suit all situations.
It can also provide a cure for sleepless nights; after all, waving goodbye to a lorry load of goods in the knowledge that payment will definitely be forthcoming in one way or another is a far better option than the alternative which in some cases can prove terminal.