We operate in a world of extended supply chains, quick turnarounds and shifting markets. So how do businesses build confidence in their counterparties? ABN AMRO Risk Director, Paul Lablans has some answers…
Have you tried working with the procurement function of a big business recently? It can be a trying experience. The sheer amount of data and processing required to become an accredited supplier can be bewildering.
For many businesses, it’s a massively one-sided affair. BigCo is doing checks on you; but what level of certainty do you have on their willingness or ability to pay for services rendered?
Even in mid-sized companies, the financial control function is likely to be relatively modest. (Some SMEs will struggle to justify a full-time financial controller at all.) And in many growing businesses, control – despite the added certainty which that brings to getting paid on time – is less of a priority than investment in sales and products.
So it’s a Catch 22: you need certainty around your Receivables to have the confidence to fund growth; but because growth is the priority, you perhaps haven’t invested in financial control and analytics that might give you that certainty around your income.
Today, that’s not just an issue for businesses dealing with smaller clients or chasing new business opportunities. High-profile corporate failures in the first half of 2018 are a reminder: any debt, owed by any customer, can go bad.
The solution is simple
A lot of our clients need to not only protect themselves but bolster their resilience. Those big companies can make contingencies for a proportion of problem payers and effectively self-insure, but whatever the size of the business, nobody can afford to be completely complacent. For many of the clients we work with, an unexpected non-payment could have a detrimental impact on their business.
Bad Debt Protection goes a long way to solving their problems. We partner with our clients to develop flexible, tailored funding solutions which enable growth and mitigate risk. And the real attraction is that it’s a simple solution to an obvious risk.
Our Client Portal makes the whole process even more streamlined, providing our clients the confidence to take on new debtors even more easily. We use the insight available to us from the wider economic environment to evaluate creditworthiness and our straight through processing augments the experience. That means over 90% of applications are okayed immediately, and the remainder within 48 hours.
It takes the uncertainty out of bad debt and is an affordable option, particularly when set against potential losses.
The Result? Peace of mind over new customers and certainty on payment. But that’s only part of the motivation for taking on Bad Debt Protection. A lot of it is about minimising the admin headaches of chasing and collecting overdue monies – especially when you’re dealing with clients in a different jurisdiction.
It’s all about timing
Apart from the high-profile corporate failures that have left suppliers with unpaid debts, there are other reasons for looking at Bad Debt Protection right now.
The UK economy is not in robust shape (and there are various different types of structural issues with the European, American and Asian economies, too) and some sectors are clearly in a precarious state – Retail springs to mind.
There are also lots of reasons to invest – from changing markets to opportunities created by automation or outsourcing. But the same forces of change that create those opportunities put customers at risk, too.
As well as those macro-economic signs, external issues like legislation and innovation have affected counterparty confidence.
Questions of clarity
Bad Debt Protection also makes businesses better counterparties. Obviously those BigCo procurement criteria vary, but knowing a supplier is less vulnerable to a customer failing to pay is a reassurance.
It not only makes them more resilient but more attractive from a credit point of view - becoming holistically more financially robust and stronger for it. That means they can make much better use of working capital – so it’s not just about offsetting risk, it’s also about helping them fund growth and investment.
We see information that even the decision-makers in the business itself probably don’t monitor on a regular basis – so we can advise when risks are increasing, for example, by drawing on smart insights from invoice behaviour.
In an uncertain world, Bad Debt Protection helps businesses gain both deeper insights into their customers and more certainty over their income. That additional confidence in today’s climate is quite some trick.
Find out more about our Bad Debt Protection here.