Thursday 30 June 2011

Trade credit-pulled TJ Hughes appoint administrators

Just three months after its suppliers reportedly had its trade credit insurance pulled, the discount department store collapsed into administration.
Given that retailers can enjoy 45+days free credit, often combined with daily delivery, it still surprises suppliers that their customers can run out of (their ) cash…
For instance, a supplier having a net profit before tax of 5% needs incremental sales of £3m for every customer that goes bust owing them £150k.
If a supplier’s wholesaler’s (say 1% Net Profit BT) customer goes bust owing £150k, the wholesaler needs incremental sales of £15m, in this market!
For this reason it is always worth running the numbers on customer exposure, especially in the current climate.
It can be unfortunate to go bankrupt, but crazy to go bust because someone owes you money….

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