Archive for the ‘Bad Debts Written-Off’ Category

Is YOUR Business selling to RETAIL?

April 24, 2017

It wasn’t that many years ago when a manufacturer didn’t really worry about Accounts Receivable (A/R’s) if one sold or supplied to a BIG NAME firm, e.g. General Motors (GM), Chrysler, Delphi, Kodak, Blockbuster, Schwinn Bicycle, Marvel Entertainment, Hugo Boss, Reader’s Digest, Trump Hotels, Sears, Radio Shack, etc., because they always paid you and you really didn’t worry the same as the neighborhood “Mom & Pop” operation, right? Even if you gave 30 or 60 day terms and didn’t get paid for 90 days, it just meant you waited but why would you really need worry.

Unfortunately, today’s world has changed substantially and auto makers like GM had to restructure with governments bailing them out, Radio Shack went under and Sears recently said there was “substantial doubt” as to their long-term operating ability. WOW! Many of the names listed above have all had to restructure and that meant unsecured vendors were not very happy.

So how do YOU manage your business to ensure that you will be paid and remain afloat? I have met so many companies, through the years, that would often have 80% of their sales from a small number of customers and I would always recommend prudent Risk Management – “don’t put all your eggs in 1 basket” – and suggest they consider diversifying their markets and considering options for transfer of their risk, e.g. trade credit insurance. Some clients neglected to follow any or much of my advice and I do know of several who are no longer in business.

Trade credit insurance is often used by firms in Europe but not so often in North America. Why? Europeans may have been less reliant on one’s reputation, perhaps, but my own banking background tells me that North American banks don’t suggest the option, don’t know enough about it and don’t vary credit terms adequately to encourage YOU obtain this. I also hear that terms are much more favorable in European banks for those companies who do purchase the option so many of you don’t feel the savings warrant the added expense.

Where I do find many Canadian (can’t say the same is more or less frequent in the US) companies using Trade Credit Insurance is in their Export Financing but why only for those types of deals? Perhaps you Factor your A/R’s but I just read “Wells Fargo & Co. is among the firms no longer providing Sears vendors with factoring — short-term financing that helps gives them a cushion.” Imagine then what I seem to hear more often than not – insurance works when you really don’t need it but often doesn’t respond when you truly have the need. Do you feel that way or have you heard this said?

This is why I continue to preach Risk Management and supplementing with a suitable Risk Transfer mechanism (insurance should not be solely price-driven when purchasing but knowing what is and is NOT covered and buying the policy from a reputable agency/brokerage with adequate Errors & Omissions insurance of their own and a suitably rated (I tend to like AM Best A-ratings or better) underwriter for your General Liability, Trade Credit, Cyber, Crime, Specialty and Directors’ & Officers’ Liability policies.

I do hope you realize that insurance buying may be 1 of the most important business decisions you make each year but I do know that you overlook this importance because of the trust you place in your providers and the lack of understanding of what is really behind an insurance contract.


Let’s discuss today! I can be reached on Twitter (@WRiskManager), on LinkedIn or Facebook and by e-mail –


Info derived from and other online material.

Thinking “Outside the Box”

November 15, 2010

Having just completed my President’s Message (Guild of Industrial, Commercial & Institutional Accountants) for the Christmas Season (yes, it is early – at least for me, I don’t try to think about Christmas until December), I decided to digest this week’s numerous events.

I heard an excellent presentation by Faith Seekings at the Toronto Chapter of CIM’s AGM (for anyone who doesn’t know, CIM is the Canadian Institute of Management) with whom I am fortunate to be connected by LinkedIn, Facebook and Twitter, as well as personally. I highly recommend her for anyone looking to synchronize their marketing efforts to show some level of uniformity from a website to business cards to stationery, brochures and corporate image.

Yesterday, I also heard someone whom I have wanted to see in person for awhile, now – Wolfgang Jaksch – and the introduction by MediConsult of their new iMRS which will be available in North America in early 2011. My wife has been treated by a health professional with the current MRS offering and I try to keep an open mind concerning anything in life so that “electro-magnetic resonance” is, obviously, something I want to know more about. Wolf even ended his presentation with an introduction to a new online “health network” – – and I wish to promote this site for good health and health-related exchanges of information.

What else is happening, from a business standpoint? It seems that my best month for new business in 9 years (yes, September was amazing) has been the catalyst for some “good luck”, though hard work seems to be the oxygen that ignited the flame. I have been attempting to close a deal for a home builder and was introduced to a realtor who also has need of commercial insurance. Then another home builder and I spoke about insuring “common elements” for a condo complex they are constructing – seems that their insurance broker may not have known it possible to insure (what other reason for the lack of service since it took them so long to provide a reply).

One account on which I have been working has added 6 other properties to insure and a former small business client of mine has asked me to quote on his business again. Recently, I insured a flea market booth for a long-time acquaintance of mine who then proceeded to provide me with a directory of listings to assist me in my solicitation efforts. Another source of business referred prospective clients to me, a new business associate has asked me to work with her on some clients and a member of the Guild of ICIA & CIM has asked me to prepare a quote for a new business of his.

Whether it be general commercial property/liability, commercial auto, Directors’ & Officers’ Liability, Builder’s Risk, Liquor Liability, Group Home/Auto or something as unique as “franchises”, “student rooming houses”, “hot dog carts”, “chip wagons” or Specialized Liability (including Product Recall and Errors & Omissions), I am ready to discuss with you.

My spreadsheet of activity for 2011 is quite substantial – including “hot” files and “cold” files that I hope to move into the warmer category during the next year. What is the reason for much of this activity and confidence? In the past, I felt that I needed to quote “apples to apples”, even if I did not agree with the coverage and deductibles. With limited markets available, it meant that I was unable to provide suitable quotes to a prospect to enable the closing of a deal. Now, our carriers are numerous – enabling us to offer reduced premiums and better coverage in most cases, allowing me to provide terms that I feel are the best for the client’s long-term insurance needs.

Why should a client have low deductibles ($500 or $1,000) if the business is most suited to $5,000 or $10,000 (or higher) deductible – yes, premiums will be lower but the client will not be faced with considering his/her filing a small claim that might mean a policy being non-renewed or having terms amended and fewer insurance companies wanting to insure that client. As the client’s “risk manager”, I might be making the decision but am expert enough to realize it is in the best interest of that client. That is a big difference, the difference from prior packaging and presentation. Confident, yes! But better yet, experienced and certain – not thinking inside old parameters but “outside the box”.

Total Cost of Risk (TCOR) – What costs should be included, really, when determining your Cost of Risk when operating your business?

November 5, 2009

Many companies and business people relate the terms “insurance” and Risk Management (RM) as being nearly synonymous.  It is necessary to realize that this is like comparing a banana with a watermelon (everyone always talks about apples and oranges so I want to be different, OK?).

Insurance, often, is considered to be a means of RM.  However, it is a means of “Risk Transfer”, solely – transferring an identified or (in some cases) unidentified “risk of loss”.  What about that “bad debt” suffered because your customer – a manufacturer, for example – just filed for bankruptcy protection that was never anticipated or that sudden devaluation of currency and the impact on your cost of imports?  Risk Transfer to a 3rd party, as in an insurance company or other similar firm, e.g. captive, pool, futures market, hedge fund, etc. for means of reimbursing a loss, after it has occurred, or reducing the impact of a catastrophic incident are all effective means of RM but are not all insurance acquisitions.

What is RM, though?  Is it a method of minimizing or reducing a loss, all the time?

This is where TCOR is involved – determining the

  • “direct costs” involved with insurance (premiums, deductibles, retentions, etc.),
  • “indirect costs” (how much time and money is involved in preparing your claims reports, meeting with the lawyers and accountants, etc.?) and
  • “prevention costs” (those Health & Safety meetings should be included in your TCOR and the costs of hiring a new employee because you just terminated someone – oh, yes that may have also been a direct cost, too).

RM includes identifying and establishing your goals in business, differentiating them based on the “certainty of managing your risk” i.e. accidental vs. speculative, etc.  It may also involve outsourcing some (yes, Commercial Lenders even give their Loan Agreement Reviews to people like us to minimize their risk of error; Lawyers don’t always have all the answers regarding Contracts and must refer to us; Accountants don’t always have the best suggestions either and do call us) questions and/or routine work for which one is not adept at handling.  Taking steps to control those risks through various cost-effective means should involve someone with RM training and experience, from Financial to Information to Operational Risk.

Many insurance agents and brokers will attempt to fill this role but, unless being paid on a fee basis (as opposed to their earning a commission on the sale of those insurance policies to you), you may be placing him/her in the potential position of a conflict of interest, are you not?  How are you able to truly trust that individual to save you money (insurance costs may decrease but there is no guarantee) in the short-term or the long-term?   I have heard this comment on numerous occasions.

Have you ever argued with that insurance broker/agent over the added cost of improving your company’s security system, e.g. sprinkler upgrade, or the effectiveness of that Business Continuity Plan in reducing a Business Interruption claim and why you’re being charged such exorbitant (in your mind) premiums?

There may be excellent reasons and the insurance company may insist, or dispute, but why not request a 2nd opinion (better yet, why not ask for our help from the start)?

This is all part of TCOR!  Surveys have indicated that much of a company’s true Cost of Risk of being in business is “non-Insurance premium” and one major international insurance company’s survey results indicate that less than 50% of all business losses are reimbursed by insurance.

This is exactly my reasoning for the emphasis on TCOR, RM and the need for consulting with an expert in the field.