Joel McGinley Brian Ashley Ted Hansen
Transcription
Joel McGinley Brian Ashley Ted Hansen
Joel McGinley, TranStrategy Partners Brian Ashley, Euler Hermes Ted Hansen, Chartwell Capital Solutions Business Credit Insurance Assets Liabilities Equity / Capital Net Working Capital What assets are insurable and insured? Where does your A/R fall on your Balance Sheet? What amount of loss would seriously impact your company‟s financial stability or annual profit? How many accounts have credit extended over that amount? ◦ Odds as to where you will experience a loss is with the A/R. ◦ Typically represents 40% of a company‟s assets ◦ Most Vulnerable to unexpected losses ◦ More likely affected by business cycles ◦ Provides cash flow for the business ◦ Only asset “under-leveraged” Catastrophic Risk Protection ◦ Prevents Disrupting Losses to one of the company‟s largest, unprotected assets ◦ Reduction of Risk of Key Account concentration levels ◦ Caps Exposure to Bad Debt Loss General Loss Prevention ◦ Support for your Credit Risk Evaluation through third party evaluations of customers, prospects, industries and countries ◦ Provides a structure and discipline for credit decision making ◦ Gain leverage over problem accounts by using underwriter‟s clout and resources Sales Expansion Expand Sales into Riskier or New Markets Grow with Existing Accounts Enhance a Customer Relationship Bank Financing Enhance Lending Relationship... High Concentration with Key Accounts „Cross-Aging Language‟ on A/R Borrowing against Export Receivables More capital at reduced rates, taking full advantage of A/R Reduction in Bad Debt Reserves Frees up Working Capital Converts non-taxable deductible provisions into a fully tax deductible insurance premium Cash A/R Hard Assets A/R ◦ Know your customers Credit worthiness Credit Application / Credit Checks Only grant credit to those worthy Accept Credit Cards or Prepayments for those with poor credit Customer‟s A/P processing requirements Paperwork required or just BOL / PO # Do they accept invoice by email or EDI A/R (continued) ◦ ◦ ◦ ◦ Quick pay discounts Accept Electronic Payments – ACH or Wire Transfer Aging management and collection Measure days invoices outstanding Days Sales = Annual Sales / 365 days Approximately $27,000 for a $10M broker Days Sales Outstanding (DSO) = A/R balance / Days Sales A $10M broker with $1M in A/R would have a DSO of 36.5 days ($1,000,000/$10,000,000*365) Hard Assets ◦ Computers and copiers ◦ Facilities A/P ◦ Be consistent and pay when you say you will ◦ Use of electronic payments (ACH & Wire Transfer) ◦ Quick Pay with discounts Next day, 2 days, 15 days T-Checks ◦ Measure average days to pay = A/P balance /Annual Cost of Goods Sold * 365 A $10M broker has a $750,000 A/P balance pays 30 days on average (750,000 / 9,000,000 *365) Banks watch closely when determining borrowing capacity and like to see historical growth Current Assets less cash – Current Liabilities less short term debt ◦ For most brokers this is A/R and Prepaid Expense less A/P and Accrual. Credit Approval Process ◦ Credit Checks ◦ Credit Limits ◦ Communication Aggressive Management of A/R ◦ One freight bill is worth 20 times it‟s value ◦ DSO at under 40 days ◦ Understand the spread between DSO and DPO Know Your Customers Understand Your Cash Needs Aggressive Management of your #1 Asset – A/R Use Measurements to Manage Stay Upside if you Want a Good Exit Joel McGinley, TranStrategy Partners [email protected] Brian Ashley, Euler Hermes [email protected] Ted Hansen, Chartwell Capital Solutions [email protected]