Marc Jones
Atradius UK
Ask the Expert: Insolvency warning signs
Marc Jones, head of sales at Atradius UK, helps companies to understand the warning signs that bad times may be ahead.
All answers are for general guidance only. Each case must be handled on the facts.
Q: How can you tell when a good business may be about to go bad?
As Britain’s leading trade credit insurer, at Atradius our job is to monitor risks, day in day out, on behalf of our customers. In the current economic climate, with insolvencies commonplace, it’s critical to be able to spot the warning signs that things could be going awry at your buyer’s end.
Firstly, are you seeing any changes in payment behaviour? This is often the first sign that things aren’t all positive. With regular customers, a payment pattern is likely to have been established: so you know if they usually pay on time or tend to need reminding. A shift can be a sign that things are changing. The best approach is to pick up the phone and pursue it – quite often it will be a mislaid invoice or dissatisfaction with a delivery but always resolve it as soon as you can.
The same applies to ordering behaviours. If your customer’s orders suddenly triple it could be cause for celebration… or it could be that their other suppliers have stopped delivery. Don’t be afraid to investigate.
Then there are delaying tactics. Beware of unnecessary queries or unjustified complaints about product quality, delivery or invoice accuracy. Establish whether there is a genuine cause for complaint and ensure that after buying your products the customer isn’t now trying to buy time. Connected to this, if your regular contacts are suddenly “unavailable” to take your calls, alarm bells should ring. A company refusing to engage in a dialogue with a creditor is inevitably in some discomfort.
Finally, watch out for unexpected changes. Changes in personnel could be prudent efficiency or cost-saving measures, but they can also be last desperate acts to stave off business failure. Changes in bank could make good business sense or could be that the previous bank has stopped lending. It is worth finding out if it is what is euphemistically termed ‘a lender of last resort’.
Contact details
Marc Jones
Head of sales
Atradius UK
02920 824 777
marc.jones@atradius.com
Download our free risk management advice www.atradius.co.uk
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About Marc
Contact Details
Marc Jones
Head of Sales,
Atradius UK
marc.jones@atradius.com
02920 824 777
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