BLUE CHIPS & FISH

2016 has started with a “bang” in particular with the insolvency of Dick Smith

Electronics. Sensationally listed on the Australian Stock Exchange only two

years ago, the demise of a so called blue chip business confirms major

companies are open to failure due to underlying invisible factors that can be

“frying” behind the scenes.

Just like when I take my boys fishing, trading on credit terms can lead to

catching a terrific King Fish or an oily Barracuda.

From a trade credit perspective, this is big news in the credit insurance realm. It

was hoped, (even with some late warning signs) that Dick Smith would recover

after the Christmas period, gain banking support and survive. For such a high

profile retail business, support leading up to the Christmas period was needed

by suppliers who in turn received support from their trade credit insurers.

With the receivers and voluntary administrators now in place, recovery efforts

of stock under retention of title via PPSA registrations will be critical to reducing

potential exposures.

Some suppliers felt there was no need to credit insure Dick Smith and in fact

mutually excluded this company from their trade credit insurance policies. It

highlights that any company can become insolvent, even when paying on

time and with the thought of “this business is too big to fail”.

With the start of a fresh year, it is a good opportunity for businesses to reassess

their credit risks to ensure their customers have the financial backing and the

ability to survive tough conditions.

It could be the right time to drop your line into your debtor’s pond to ensure

you are dealing with King Fish rather than an Barracuda.

KIRK CHEESMAN MANAGING DIRECTOR +61 419 865 313

National Credit Insurance (NCI) have been supporting companies with dealing

with the right customers and providing trade credit solutions to protect their

profits. Offering trade credit insurance, credit risk management solutions and

commercial recoveries, NCI can assist with all your trade credit requirements

under one roof.

Freecall: 0800 442 556 www.ncinz.co.nz