NCI’s trade credit risk index is based on a number of factors including the volume of trade credit claims being received, the number of overdue debts put for collection, credit limit assessments and levels of overdues being reported. A number of senior national credit managers are also consulted with their thoughts on credit conditions.
Credit insurance claims have increased by 16.5% since Q1 and there has been a 9% increase in the number of overdue debts reported. The number of claims being submitted are still well above the levels prior to the GFC.
This year has seen an increasing number of company insolvencies in our largest trading partner Australia with 1,556 insolvencies registered in May 2013, the highest amount of insolvencies recorded since March 2009.
While the construction industry in New Zealand begins to show signs of growth we have still seen several large insolvencies with Mainzeal and Starplus Homes in the first half of 2013. Many long-established companies have faced insolvency confirming the notion that it is dangerous to assume the resilience of mature companies in the volatile economic environment.
50% of credit managers surveyed have experienced 5 or more insolvencies in the last 3 months. The NCI trade credit risk index aims to assist businesses to not only review historical and current conditions, but use this data to monitor and adjust credit risk assessment accordingly to the market trends.
“Credit insurance claims have increased by 16% since Q1 and there has been a 9% increase in the number of overdue debts reported”
National Credit Insurance, (NCI) is a specialist broker of credit risk management solutions, including Trade Credit Insurance.
While its common around the world for businesses to protect themselves from debtor risk using credit insurance as a tool to grow safely, it’s not a subject well understood in NZ or Australia.
Despite this NCI are currently handling over $50,000,000 in bad debt claims as businesses realise the ‘hand shake deals’ of yesteryear no longer provide any comfort in today’s trading environment.
Since the GFC, Phil Ashby NZ manager of NCI has seen many businesses re-evaluate their treatment of debtors and the real risks of buyer insolvency.
In many cases the common response to NCI’s offer to provide quotes to transfer credit risk are ”We regret we didn’t know about it sooner credit insurance sooner”
By protecting your business against the cost of a Bad Debt through Credit Insurance, you can:
- Preserve profit - Too often and too late businesses realise that a bad debt is really lost profit.
- Protect liquidity and cashflow – The proceeds of a credit insurance claim inject liquid funds back into your business
- Confidence to expand – Knowing that the cost of potential failures has been covered
- Strengthen credit management – Firm credit limit decisions are provided on larger debtors based on sound analysis and information
- Add security – Insuring your ledger often provides a new source of security to offer financiers
For more information on the NCI trade credit risk index or to find out more about credit insurance please visit: www.ncinz.co.nz
Or call 0800 442 556, for a no obligation review of your credit risk profile.