Is your construction business at risk if one of its customers or suppliers goes bust?
At the end of January plant company Hawk went into administration, this was especially surprising as its accounts had just been signed off showing a profit. It is supposed that the main cause of their collapse was the £800,000 owed to them by Carillion, which went bust a few months previously. The collapse of Hawk will undoubtedly send out ripples to its supply chain with suppliers owed money and customers owed equipment.
This sad news follows other insolvencies in the construction industry, including Scottish M&E contractor Richard Irvin & Sons who owe £17m to suppliers, Suffolk drylining firm Radford Group that owes £5m, and subcontractor Proline Group that has entered administration being owed money by the collapsed contractor Herbert T Forrest.
With other sectors also struggling and the uncertainties of Brexit it is likely that we will see more businesses hitting the wall. So how should your business protect itself from the potentially devastating costs of not being paid or the impact of paying for goods or services that are not delivered?
Even a small unpaid debt can be significant when you consider how much you have to earn to replace the loss. For example, if you have a 10% margin you will need to earn £50,000 to cover a £5,000 unpaid bill.
Trade Credit Insurance is one way to help. Some of benefits of trade credit insurance include:
- Monitoring your supply chain to warn you if a customer or supplier looks like they may be having financial difficulties, giving you the opportunity to remove or reduce the risks.
- Assistance in selecting suppliers & customers based on financial stability.
- If a bill is not paid or service not delivered your insurer will take legal steps to recover your money. If recovery is not possible, the insurance will pay you 90% of what you have lost.
- Businesses with Trade Credit insurance are often able to obtain favourable terms from lenders and factoring organisations that value the protection Trade Credit Insurance gives your business.
If you would like assistance or advice regarding Trade Credit Insurance please call us now on 01905 21681 or email us here.