Credit control under pressure with credit insurance withdrawal

Alan in Cashflow problems | No Comments

Trade organisations are up in arms over the withdrawal of trade credit insurance for many retailers and this is putting ever increasing pressure on retailers credit control.  The British Retail Consortium (BRC) today published a survey stating more than half of large retail respondents said the reduction or withdrawal of trade credit insurance had adversely affected their business and their credit control. Of those, more than three quarters said it had led to problems with up to a quarter of their suppliers.

It is the suppliers who are really feeling the knock on effect and credit control becomes a key issue in keeping their cash flow under control.
The Quarterly Credit Conditions Monitor also found that a third of small and medium-sized (SME) retailers and almost a fifth of large retailers have experienced a reduction in bank lending in the last three months. For those respondents who cited a fall in lending, more than two-thirds of SME retailers said it had undermined their ability to trade.

Many supplier businesses have expressed their concerns over the impact on retailers and in turn on them and there need to be more rigorous with their credit control.

“It’s clear from the BRC Monitor that the majority of respondents are not confident of trade credit insurers’ ability to assess risk accurately. The Association of British Insurers’ codes aren’t improving underwriting – as they were meant to. The government must put more pressure on these insurers to undertake proper research to ensure more accurate underwriting decisions.”

The insurers fail to see the impact on suppliers credit control and their concerns with relationships between retailers and their suppliers will come under further pressure. Price pressure for both has been a particularlar problem and these pressures will only create further credit control problems.