Showing posts with label fair share. Show all posts
Showing posts with label fair share. Show all posts

Monday, 20 August 2012

Roy of the Rovers - a lesson in fair play?

Last week’s demise of The Dandy brought to mind another childhood source of entertainment and insight, Roy of the Rovers.
Like most other 10 year olds, each week I eagerly awaited the arrival of The Tiger comic, featuring the life and times of Melchester’s star player.

Fair Play?
However, on one shocking occasion, a rival player, in full view of the reader, but out-of-sight of the referee, actually flicked the ball with his hand to enhance his shot. This unlawful move so outraged me I rapidly scanned the rest of the strip in vain for evidence that the move had been noted as the subject of a penalty, at least..
My sense of injustice was such that for the next five weeks I was on the newsagent’s door-step by opening time, awaiting delivery of the latest edition to check whether the authorities had taken any action..

Gradually it dawned on me that perhaps football, life and even business itself was not always fair.

I then began to wonder if there were other potential career-enhancing insights available via Roy’s storyline?

A source of continuous education…?
Unlike more gently-reared modern players, Roy enjoyed a 39 year playing career, until the loss of his foot in a helicopter crash in 1993. To keep the strip exciting, Melchester was almost every year either competing for major honours or struggling against relegation to a lower division, allowing repeating opportunities for readers to develop their numeracy skills, especially in calculating the odds in each scenario.

Planning & focus?
The strip followed the structure of the football season, thus providing  great awareness of deadlines, the need for planning and teamwork, but especially the ability to optimise output within the time constraints of a match, against rivals intent upon minimising the impact of such endeavours.

Global reach?
Geographical insight was enhanced via the team’s foreign travel. In the several months each year when there was no UK football the most common summer storyline saw Melchester touring a fictional country in an exotic part of the world, often South America, where they would invariably be kidnapped and held to ransom.

Negotiation against the odds?
During the first ten years of his playing career, Roy was kidnapped at least five times. This obviously enhanced readers’ negotiation and financial skills, helping them to distinguish cost and value of experience and longevity in a high-output career…

Career application?
Given the benefits of this source of inspiration and early induction, readers that later chose a NAM career appeared to arrive ready-made, exhibiting the ability to demonstrate "real 'Roy of the Rovers' stuff", displaying great skill, or results that went against the odds, in their dealings with the UK trade….

And often without the benefit of much formal training, curiously enough…

Thursday, 16 August 2012

Tesco catchup in the UK - a need for context?

Yesterday’s news of Tesco’s improved 3.4% sales growth is encouraging but needs to be kept in context:
- UK refocus: The company has completely refocused on the UK market, and has been spending appropriately (£1bn) since January
- Inflation: With food inflation running at 3.2%, Tesco is only slightly ahead
- Market growth: With the overall food market growing at 3.9%, Tesco is slightly behind
- Competition: Rivals are growing faster (Asda +6.2%, JS +4.6%)
- Fundamental ratios:
            -  where Tesco are:     ROCE12.3%, Net Margin5.9%, Stockturn 17.9 times, Gearing 55.8%
- Fundamental ratios:
            -  where Tesco need to be: ROCE 15%, Net Margin 5.0%, Stockturn 25 times, Gearing 30%
- Outside help: At 3.4% growth rate, a tightly-run Tesco will need considerable supplier support to improve these ratios, and hold UK market share
-      ..especially if they decide to take the nuclear pricing option 

Bearing in mind that ‘It ain't over till the fat lady sings…’, Tesco cannot afford to optimise overseas opportunities until this UK issue is resolved

In other words, Tesco needs to deliver on the fundamental key ratios and hold 31% market share, with growth matching that of the market, before being able to ‘park’ the UK….

As a supplier, it is now time to decide the extent to which you are prepared to offer a little help…

Thursday, 2 August 2012

Tesco's credit rating – what it means for you?

Yesterday’s warning by Standard & Poor that ongoing pressure from intensifying competition, weak consumer spending and lower profits could trigger a downgrade to its risk profile and credit rating should not be seen as another nail in the Tesco coffin.

Tesco's previous ratings
In fact, regular readers will know that Tesco have been here before (Moody’s in April 2012, and May 2009). It also helps to bear in mind that the credit rating represents the credit rating agency's evaluation of qualitative and quantitative information for a company or government; including non-public information obtained by the credit rating agencies analysts. Yesterday’s announcement referred to a long term (i.e. after a year) rating, making it more expensive to borrow, but no issues in the short term.

Why the rating matters to you
However, the mention of  ‘lower profits’ as a cause, means that Tesco is effectively prevented from drawing heavily on current profitability to fund its £1bn revitalising initiative, or indeed any ‘nuclear pricing’ options (see KamBlog).

What Tesco needs to do
Apart from a need to make "targeted" disposals, cutting back capital expenditure and/or shareholder pay-outs as possible options, the ratings threat means that Tesco will be forced to place more emphasis on internal savings….
As you know, for a retailer these can include a combination of cost-price reductions, optimising of credit terms/settlement discount trade-offs, increased trade funding, strict application of deductions and improved service levels…

This means it is perhaps time to re-evaluate your position on each of these elements of your Tesco trading relationship, as a basis for determining your fair share of any help Tesco may require in funding its strategy.

Deriving your bespoke rating of the customer:
Finally, a ratings agency score can be a fairly blunt instrument from a NAM’s point of view. Better for you to derive a bespoke rating via a combination of analysis of the customer’s ROCE, Net Margin, Stockturn and Gearing, overlaid against your terms, trade-funding and service level, in order to establish and demonstrate your fair share of any remedial action…

Not doing so can represent more risk than you need, in the current climate.

Wednesday, 18 July 2012

Right Selfishness Quotient? - how selfishness can compromise your network response…

If you are in the business of persuading others via networking (know anyone who is not?) then perhaps it is time to check your ‘selfishness quotient’ as an indicator of possible low responsiveness?
In other words, what you give (free) should always exceed your receipts by a factor of 10… i.e. at any point in time there should be 90% giving vs.10% response…scarey!
Having sorted your inputting/outputting, a sure way to improve the odds is to check your Linkedin contacts and delete those who only allow you access to ‘shared’ contacts -  the ultimate indicator of selfishness?
This will at least ensure that your remaining network contains individuals that are into a bit of give-and-take, with the right encouragement...
For (free!) guidelines on Optimising your Networking see KamLibrary

Wednesday, 4 July 2012

Economies of scale: Customers Looking For Savings From Suppliers

Yesterday’s NamNews’ item on Morrisons’ alleged demands for £500k savings from some suppliers produced our top visitor-count for the day.  
However, the issue is not whether larger quantities mean greater savings, but whether the discount demanded by the buyer matches the savings made by the supplier.

'Economies of Scale'
As you know, there are many potential sources of economies of scale, depending on the company and category in question, including:
- spreading administrative overheads over a bigger operation/quantities
- purchasing power to get better deals from suppliers of raw materials, packaging, etc
- lower costs in manufacturing - e.g. if longer runs result in lower costs per unit produced
- greater delivery quantities leading to lower distribution costs
- cross selling synergies
Any such savings will obviously depend upon your category and factory capacity/asset-utilisation levels.
The incremental sales route to fair-share negotiation
However, either way, the ‘incremental sale’ calculation allows suppliers to approach the problem from a more productive angle…
In other words, if a customer demands £500k cost-price reduction from a supplier netting 7% on the business with that customer, a ‘back-of-envelope’ calculation says the supplier needs incremental sales of £7.1m to cover the cost (i.e. £500k/7 x 100), unless you can identify and measure some real scale savings, and reduce the incremental sales requirement appropriately.
The basis of your costing-model
Any credible negotiation stance means that you will need to reveal the basis of your costing-model ( i.e. even tougher negotiation with your colleagues?) in order to be able to quantify and argue with the buyer that there is a shortfall between the actual savings and the discount demanded, an additional discount that will not realistically be covered by the anticipated incremental sales. 
Quantifying in this way may result in something approaching a fair-share solution..
Simply saying no is not an option

Q1. Why not substitute your figures and see how much extra you need to sell in order to break-even on the new deal?
Q2. Some might argue that explaining scale economies to a customer is not the job of a NAM/KAM. If so, please explain to us mere earthlings why the global financial crisis is diminishing, rather than enriching, the scope of the job…

Wednesday, 2 May 2012

Buyer-seller corruption, a potential hot-potato for all?

Yesterday’s court case involving large-scale corrupt payments to a potato buyer raises important issues for suppliers and retailers. Given the potential impact on share prices of both parties, coupled with ever stringent corporate and government monitoring in these unprecedented times, it is surprising that anyone is nowadays prepared to take the risk of being a party to corrupt inducements to buy. In other words, it needs just one person with a conscience, or a grievance, to lift the lid….

However, given that the current plaintiff was arrested in 2008, with the case having now arrived in court, it could be said that parties on each side of the seller-buyer relationship harbouring any doubts re. their version of the selling-buying process have had adequate time to reflect on the implications and take appropriate action.

The distinction between gifts and bribery
If buying decisions were made solely on objective, rational criteria, a computer would probably do a better job. Instead, given that the basic offer satisfies the key objective criteria, then a host of emotional criteria/influences/needs come into play.

Emotional needs in buying 
These include needs for avoiding effort, self-esteem, (pride, self-importance, power), to imitate, to acquire money (via saving vs. making, for the company) need for possession (icing-on-cake), investigate (data), create (new), sense of duty, and especially a need for security (avoiding fear). These can include meals out, or even a bottle of whisky at Christmas.

It needs to be emphasised that such attempts to satisfy the emotional needs of a buyer are not corruption, they are merely ‘icing on the cake’ by way of celebrating a done deal, a deal which ticks all the rational, objective boxes.

Bribery defined
Bribery is quite clearly an overt inducement to the buyer to over-ride the logic of a buying decision where a supplier’s competitor is patently offering a better deal on a like-with-like basis. In other words, the supplier’s offering is equal with that of the competitor except for the additional £10k on the price to fund the bribe.

This point, the first of many, was brought out yesterday in court by the prosecution: "A peculiar feature of the corruption was that it was self-funding. [The supplier was] not paying for it, [the retailer was] paying for the corruption of their own buyer and this was achieved by overcharging [the retailer]".

Action for NAMs and KAMs
The answer for NAMs/KAM’s is always to attempt to revert to the base deal and check that it satisfies objective buying criteria (the buyer’s job needs), like-with-like, before focusing on the buyer’s emotional needs. In practice some of this process occurs simultaneously, but it remains vital that the supplier’s basic offering is defensible and transparent, always, and with 20/20 hindsight…..its the nature of the job, folks. 

Wednesday, 11 April 2012

Tesco's strategic options, suppliers' strategic response

What is this about?
Tesco’s core issue is its profit warning in January, ultimately a driver of ROCE, in turn affecting the share price. With 2/3 of its business in UK, any setback causes the company to challenge one of the basic ‘rules’ in global retailing – ‘dominate the home market’. However, any company having more than 25% of a national retail market attracts negative attention from media, politicians and ultimately shopper-voters. Within the home market, supply chain efficiency made some large space redundant unless freed-space is filled via product diversification. Meanwhile, having grown share at the expense of less efficient competitors, Tesco is now being challenged by retailers that are as good as, or better, for a share of a zero-sum, flat-line market in terms of range, quality and service, as it strives to return to the Tesco 'rule of 25'.
Finally, the early retirement of a strong unchallenged leader left at least four people who felt they should fill his shoes…

Where is it headed?
Essentially, Tesco has four complementary options:
  • Sell more of its current products to current users (increase basket size)
  • Sell new products to existing users (Clubcard data, trade up via diversification)
  • Sell current products to new users (use Clubcard data to profile ideal Tesco users and attract more of this profile with current products)
  • Sell new products to new users (high risk, given two unknowns)
They need to re-apply this formula in the UK, delivering greater perceived value to shoppers, vs. competition, and then roll this strategy out globally.
They need to re-assess their competitive appeal in the eyes of shoppers, vs. the competition in terms of range, quality and service, vs. price. The leadership issue needs sorting in order that the entire company pulls in one direction, rather than each function attempting to ‘rescue’ Tesco. This was the challenge faced and successfully dealt with by McLaurin many years ago….
How does it affect you?
Essentially depends upon category, geographical spread and degree-of-partnership, but in the short term the above strategy will put pressure on all aspects of the supplier-retailer relationship, especially price and supply-chain efficiency, as Tesco re-appraises its supplier-base vs. alternatives available
What to do about it?
  • Re-assess your competitive appeal to Tesco as a company, and brand within key categories, and re-engineer to optimise, where necessary
  • Re-evaluate your match with trade partnership criteria (Potential, Partnership, Profit and Performance)
  • Invest (time, money, people) in what can demonstrably help Tesco implement its strategies, and meets your ROCE objectives 
Above all, insist on fair-play in all aspects of your Tesco trade partnership, a once-only opportunity…

Thursday, 15 March 2012

Where now for Tesco succession?

Too early to check the hats in the ring, we believe the City will give Clarke a year, following the Brasher development.

Decision time
-  A fast, high-level internal switch would allow Clarke to maintain global momentum. 
-  Going outside for what would need to be a strong, experienced and ‘natural-for-the job’ player would take too long, might simply re-ignite possible internal career-pressures, and could suggest a possible Clarke-replacement option for the City….. 

Marketplace reaction
Meanwhile, competition in the marketplace will be a combination of Tesco defence, with other multiples attempting various degrees of land-grabbing, all now led by very experienced teams focused on optimising this new window at Tesco’s expense.

Supplier action
Suppliers now need to revisit their trade strategies to reflect new competitive appeals in an unprecedented market, and factor in probable moves of the mults. Retailers will not waste time being subtle, so the moves should be pretty obvious.

Then working from 'their' consumer back to the essence of the brand, suppliers should simplify and make the offering very transparent, and echo this in simplified trade strategies, with built-in fair share and compliance conditions, all the way through the supply-chain...

Or sit on the sidelines, have a better view of the race 
and wait for things to settle down...
Either way, it is going to be tough, very tough for all stakeholders…

Thursday, 1 March 2012

Making Settlement Discount Work

With the major multiples collectively owing UK suppliers approx. £10bn at any time and paying on average in 43 days, this free credit represents both cost and risk. With banks unwilling to lend, retailers can be a source of finance. As cash-machines that happen to sell groceries, retailers can even be willing to pay on delivery, if the price is right

Monday, 27 February 2012

Optimising the Value of Trade Credit

How to calculate cost to you and value to the customer, of free trade credit
Make trade credit an integral part of the negotiation process, and not just another trade term...

Thursday, 16 February 2012

Making the 'Size of Deal on the Table' Count in Negotiation?

Given the current financial pressures in the market, no deal with a customer can/should be regarded as ‘one-off’. In fact, all arrangements with a buyer have a knock-on effect and should be factored into the total business performance for each party. By placing the deal in a proper market context, it is easier to add value on completion and ensure a greater degree of compliance.  
In practice it means making the following upfront calculations:
Customer’s share of the category (£,%)
Establishing the customer’s share of the category allows us to allocate an appropriate level of preparation and investment, with a realistic view of both upside potential and consequences of getting it wrong…
Customer’s share of our business (£, %)
Again, knowing that a customer accounts for 15%, rather than 1% of our business has to help us to prioritise all aspects of the relationship and quantify the impact on our sales and net profit, for the whole team...
Our share of their business (£, %)
Realising that we account for less than 0.001% of the customer's business can explain some of the issues with getting appointments, and difficulties in making the buyer listen, but can help to reduce  arrogance-levels on the part of strong branded manufacturers attempting to break into a new channel...
Our share of their category (£, %)
However, when we have 20+% of a customer’s definition of a category, it is obviously useful to move the conversation quickly from share of business to share of category in order to restore our confidence and buyer-appeal.
Size of the deal for them (Sales, Gross Profit)
Only at this stage is it appropriate to calculate specific dimensions of the deal in terms of sales and gross profit. In other words, if a customer is buying £200,000 from us and resells for £250,000, making a 20% gross profit, this £50k limits on the size of the buyer’s potential concessions available for negotiation.
Size of the deal for us (Sales, Gross Profit)
Knowing that our ex-factory cost is 50% of the £200,000 sold to the buyer, tells us that we have a maximum pool of £100k in discretionary funds from which to make concessions, and can provide a basis for fair-share negotiation...  

If the above process still seems over-the-top for a ‘one-off’ deal, then going in blind will probably result in a ‘one-off’ outcome, adding to our overall uncertainty/stress-levels, and doing little to optimise the relationship in these already uncertain times.
As always, your call….

Thursday, 15 December 2011

Bullying suppliers: the noose tightens…

Australia’s Coles group has reportedly issued a document to its buyers, warning them to work within the rules and not to bully suppliers. The highly unusual move was reported by The Weekly Times, which said it had seen the document, titled ‘Compliance Factsheet - Unconscionable Conduct’ and said to include “threatening to delete or withdraw a product unless a supplier provides greater funding, rebates or discounts than otherwise previously agreed”.
Despite being simply a local level example of government eventually reacting to ‘excessive market concentration’ this initiative should be seen as a global reaction to potential abuse of power by people who find themselves with the freedom to sign cheques in dealing with people who need the money…
The legislation to deal with this situation is already in place, with GSCOP a prime example in the UK.
Couple with this the emergence of the savvy consumer determined to receive demonstrable value-for-money in dealing with retailers and brand owners, and it is possible to see this ‘common sense’ assessment being transferred up the supply-chain. The global financial wake-up call simply swept away the nonsense, enabling all parties to see business dealing more clearly, and gave them the courage to demand evidence of fair-share behaviour…
Also, given the government’s willingness not to punish corporate whistle-blowers when illegal anti-competitive practices are exposed by one of the parties, it can be seen that major retailers will be increasingly tempted to complain to the authorities when they feel, or can prove, that rivals are gaining unfair competitive advantage via illegal pressure on suppliers.
However, in the meantime, a real opportunity exists for those retailers that are prepared to play fair in negotiating with suppliers of all sizes. Despite the global financial pressures, suppliers still have some discretion in allocating trade funding, and are prepared to go that extra mile, or even kilometre, with retailers that are playing by fair-share rules, the ultimate source of real and sustainable competitive advantage….

Tuesday, 22 November 2011

Debenhams early payment of suppliers’ invoices - how to calculate a fair share settlement discount?

According to the Financial Times, Debenhams has been allegedly offering suppliers earlier payment in exchange for a discount on their invoices, a process adopted by some other big retailers. It appears that its supplier terms can be up to 120 days, although people close to the company say it also has suppliers on 30-day payment terms.
Successful negotiation of a fair-share discount off invoice is possible using the following process:
Say, annual Invoiced sales to the Customer = £9.5m
Customer now pays in 90 days
We want him to pay in 42 days
i.e. a 48-day reduction in payment period

Customer now pays       4.06 times per year i.e. 365/90              

We want him to pay       8.7 times per year i.e. 365/42                           

Amount he owes us when paying in 90 days
                                                = £9.5m/4.06 = £2.34m
Amount he owes us when paying in 42 days
                                                = £9.5m/ 8.7  = £1.1m
Therefore the cashflow saving = £2.34m - £1.1m
                                                = £1.24m

Say the cost of borrowing is 10% interest per year
Therefore the cost of borrowing £1.24m for a year
                                                         = £0.124m

Which is equivalent to 1.3% of sales
                                          i.e.  £0.124m/£9.5 x 100%
Therefore any extra discount above 1.3% is attractive to the customer (or should be….! )
This discount is the most you should offer for a 48-day reduction in payment period!
(To tailor the calculation to your company-customer relationship, simply substitute your figures for sales, current payment periods and desired payment periods)
Incidentally, why stop at 42 days credit, a credit period in which a lot could go wrong?
In fact given the current state of the Euro-manoeuvres, we could soon enter an environment where selling to customers for cash becomes the only safe option…..!

Friday, 15 January 2010

GSCOP: Something for the final Weekend of 2009?

With the real 2010 finally kicking off next Monday (snow, etc?) the effect of the most fundamental change-agent in supplier-retailer trading relationships will begin to make an impact.
To help you hit the ground running, we have analysed 3 pages of the new GSCOP and added 3 pages of calculation pointers to help show that the parts dealing with Prices & Payments, Promotions and Other Duties can have a positive outcome, given the right tools…

Make the most of your last real reflective opportunity to put the GSCOP onto the 2010 Agenda, by downloading a personal copy of our free analysis

Have a reflective Weekend, from the Namnews Team!

Tuesday, 3 November 2009

BOGOF: A fair share of the losses?

Persuading your customer to forego their retail margin on the free item can help, but you both lose money!

This example shows where a retailer and a supplier decide to jointly fund the BOGOF promotion. This means the supplier will supply the free item ‘free of charge’ to the retailer, who in turn offers ‘buy one, get one free’ to the shopper for £10. The supplier makes a normal gross margin of 50% (in other words they can manufacture the product for 50% of the price to the trade). The supplier also makes a normal net profit of 10% on normal sales.
Meanwhile, the retailer makes a normal trade margin of 25% of shelf prices, ex VAT, has handling costs 0f 10% and overheads of 10%, leaving 5% net profit. As you know, state-of-art retailers normally have a net profit of 5% of sales, ex VAT.

In this example, where the retailer gives up his gross margin on the free item, and the supplier provides the free item free-of-charge to the retailer, it can be seen that the retailer loses £0.75 per item, or £1.50 per BOGOF and the supplier loses £1.50 per item, or £3 per BOGOF sold.
Obviously, this means that both parties will lose money on every BOGOF promotion!

See yesterday's post below for when the retailer refuses to forego the retail margin!

Wednesday, 12 August 2009

Buyers are what we make them?

….over 200 retailers analised* to discover…

A chance typo today in an email from a researcher pal of mine raises the thought that perhaps a supplier’s treatment of buyers over the years has caused them to regress to a more primative stage in their negotiation behaviour?....

…or perhaps not?

* Anal: a stage in psychosexual development when the child's interest is concentrated on the anal region; fixation at this stage is said to result in orderliness, meanness, stubbornness, compulsiveness, etc.

Monday, 6 April 2009

Making sense in recession (1)

Retail landlords being challenged to apply common sense to an antique 3-month rental, upward-only rent review model (ie better to have a shop occupied at lower rent, than have an empty shell dragging down the environment surrounding those still open, a perpetual reminder to shoppers not to spend too much!)

Retailers turning over some products daily, yet taking 30-90 days to pay suppliers, picking up resentment and bad press in the process ( i.e. As one of the few business models taking cash in at one end, perhaps retailers should ‘buy’ additional margin with shorter credit periods, and solve both problems in one stroke?)

Suppliers still spreading resources and product portfolio evenly over all major customers, when partner-fit has changed radically in the past six months (i.e. time to reappraise entire product portfolio vs. recessionary consumer need, related to recessionary customer-profile in order to allocate recessionary resources (new mix of time money and people) to the recessionary customer profile on the basis of Invest, Maintain or Divest?)

Sunday, 29 March 2009

Wal-Mart Increases Buying Muscle in Prescription Medicines…

( A small step for W-M, a monumental move in cost-reduction of healthcare provision, everywhere…)
In the US, Wal-Mart' new partnership with Caterpillar Inc means the retailer will negotiate with manufacturers and supply ethical pharmaceuticals to Caterpillar's 70,000 employees, a service that will probably be extended to other major companies wishing to reduce employee healthcare costs.
In doing so, Wal-mart will bypass the Pharmacy Benefit Manager system*, which accounts for over 70% of ethical pharmaceutical medicines dispensed in the US.
- How well will prescription medicine contract-negotiators handle Wal-Mart buyers?
- When will W-M try to aggregate their purchases of OTC and Ethicals from individual manufacturers?
- How long before Tesco, Carrefour, Alliance Boots explore their options?
- Given the global financial crisis, how long before governments everywhere see this as a way of further reducing healthcare costs?
- A new momentum for parapharmacy?

NB Even if this is a million miles from your immediate day-job, why not point your healthcare colleagues/network-partners at this blog-item, by way of early warning of the type of negotiating customary in your category…?

(*A Pharmacy Benefit Manager (PBM) is a third party administrator of prescription drug programmes. They are primarily responsible for processing and paying prescription drug claims. They also are responsible for developing and maintaining the formulary, contracting with pharmacies, and negotiating discounts and rebates with drug manufacturers. Responsible for approx 70% of US prescription medicine purchases)

Friday, 20 March 2009

Credit insurance fury reaches boiling point

News that the financial crisis is causing retailers to demand government intervention to curb the powers (or even replace) credit insurers, is perhaps missing the point. And besides, at the current rate of bail-outs and taking controlling shares in business, we shall all be (un)civil servants by the year end…
As you know, trade credit insurance is purchased by businesses to insure their accounts receivable from loss due to the insolvency of the debtors. Incidentally, most retailers are insolvent, in that their Quick Assets represent about 10% of their Current Liabilities instead of 1:1 like 'normal' businesses. The monthly premium is calculated as a percentage of sales of that month or as a percentage of all outstanding receivables. In other words, credit insurers are calculating and spreading risk, and charging for the service (being what they do…)
There may be some issue with the scale of their charges (so Government should perhaps act to increase the number of providers, three major players, at last count (!), and drive down rates) but as businesses, they are entitled to make a call on when to withdraw insurance when they feel the premium to cover a given retailer-risk would be 'unsellable' to suppliers…
As usual, when it comes to the Crunch, NAMs & KAMs are on their own….
Why not work out the cost of credit for your dubious customers, and then do a risk analysis, (impact on your business & chance of them going bust) to decide your next move…before it is decided for you…?
Or perhaps watch our 'going bust' video while you wait !
Have a Good Weekend, regardless!