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
◦ 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
◦ More likely affected by business
◦ 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
 A/R
Hard Assets
◦ 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
◦ 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]