There is something quietly remarkable about watching a tightrope walker. The skill, the balance, the calm under pressure. But the real reason they are willing to step further out on the wire is simple. There is a net underneath them.
In the drinks industry, every supplier is on a wire of sorts. You extend credit to bottle shops, distributors, on-premise venues and to export buyers across the globe. Each new account, each higher limit, each new market is another step further out from the platform.
The growth is where the excitement is. So is the drop.
In NCI’s 40+ years as a specialist trade credit insurance broker, the businesses that grow fastest are not the ones who refuse to take the walk. They are the ones who know there is something underneath them if a buyer goes down.
That something is trade credit insurance. In a nutshell, it is an insurance product that protects your business against the risk of a bad debt. Typically, an insured debt can be covered for up to 90 per cent of what you are owed if an insured customer cannot pay.
Many drinks businesses insure their warehouses, their fleet and their stock without a second thought. But your debtors ledger is quite often the largest asset within your balance sheet. In an industry of seasonal trading, thin margins and concentrated retail buyers, it is also the most volatile.
The catch most businesses miss is that the net is not just there to catch you. It is what lets you walk further out in the first place.
In our experience, suppliers with a trade credit policy in place behave differently. They approve larger limits to growing pubs and bottle shop groups, knowing the risk is shared with an underwriter. They take on new export accounts in markets where local credit information is hard to come by. They say yes to the venue group that wants unique terms rather than losing the opportunity to a competitor. They onboard the new distributor without spending three weeks chasing financials and personal guarantees.
That is not reckless trading. That is calculated growth supported by trade credit insurance.
NCI have been recording data for the past 40 years and our most recent NCI Trade Credit Risk Index points to ongoing pressure across hospitality and retail. Hospitality insolvencies in particular have been running at very high levels. The ripple effect of a single venue group failure can sit with a wine or spirits supplier for months. A trade credit insurance policy can act as a circuit breaker to that domino effect.
It is an important reminder that no matter how comfortable you may be with a ‘blue chip’ national retailer or a customer you have traded with for decades, insolvency could occur at any stage. We have lost count of the conversations that begin with “but we’ve been trading with them for years and they’ve never skipped a beat”.
So, before your next strategy session, ask yourself a simple question. If the net was in place, where would your sales team be willing to walk? Bigger limits, new venues, new markets, longer terms. The growth is on the wire and the confidence to step out comes from what is underneath.
NCI Trade Credit Solutions
info@nci.com.au
1800 882 820
www.nci.com.au
NCI is a Silver Partner of the Drinks Association.