When credit insurance doesn’t take a slice out of the profits – a Q&A with Bradburys Chairman George Paul
On November 18, we held a webinar with the Chairman of Bradburys Cheese, George Paul and his Financial Director Stephen Dillon to talk about trade credit insurance. The webinar was run in conjunction with Richard Welbourne from our ecosystem partner, Avenue Credit Insurance, and has been summarized below for your convenience. The full webinar is available on-demand, here.
What is trade credit insurance?
Who is Bradburys Cheese?
Bradburys Cheese was founded in 1884 by the Reverend William John Bradbury. George Paul, who has been in the dairy trade for 52 years, took over the business in 1994 and has taken it from an annual turnover of £4 million, to around £70 million in 2021. It employs 170 people from one town alone and, across the company, is responsible for the livelihoods of 210 people.
Bradburys Cheese has had credit insurance since 2007, moving its policy to Avenue Insurance in 2020. In 2017, they suffered a loss and needed to claim on their policy. In this interview, George Paul discusses why he took out credit insurance, the help it gave him when he needed to claim, the reassurance it gives him today and the advice he’d give to someone considering it for their business.
Q: What are the risks of being in business in a post-COVID world?
George: “The world is a very volatile place at the moment. Over the last 19 months, there are companies who have deferred rent, rates, all kinds of things and that’s sitting on their books and we’re coming back into a post-COVID world, which is the worst I’ve ever seen in my 50 years in trading. I’ve seen shortages, price increases, transport problems, cardboard shortages, milk shortages, exchange rate problems, too many to mention but I’ve never seen it all at the same time and that’s coming to businesses, some of whom are carrying substantial debt.
“You may think the company you are supplying is in good financial state, and it may well be, but how much debt are they carrying? How do you know if they’ve paid their taxes? In a scenario like that, it doesn’t take much to bring the whole business down and your money could be swept away with it, as ours was.
“Or their business might be in a good state but if they are linking to others that are not as good, the same net result will come down that line to any uninsured business. In the UK at the moment, one in five businesses is carrying significant financial risk and their problems could be the downfall of your company if you aren’t aware of them.
“Businesses these days need to pay much more attention to how good a customer’s governance of their business is. These days don’t just ask ‘how well do you know your customer’ but ‘how well does your customer know their own supply chain?”
Q: What made you take out credit insurance?
George: “When we were a smaller business, I didn’t think we needed credit insurance, I thought we could manage things ourselves and that it was an expense I didn’t need to pay. As we pivoted into bigger customers and a more demanding credit level, the scene changed. I realised we needed help. The world was a less risky place back then and information was more transparent and readily available on your customer. Now everyone works in such silos it’s almost impossible to get information about a company. Chances are the person you speak to hasn’t any more idea about the financial status of the company than you do.”
Paying for protection and information
“What really made us take out the credit insurance was when we decided to get into exporting back in 2007. We realised we didn’t have the time, or the knowledge of other markets and we really needed someone with trade experience to take an impartial, professional look at clients, someone who had the time to study details and backgrounds and understand the financial structures and risks that they could see in a potential customer. We were more linked to the buyers ourselves, so we didn’t have this kind of information and we weren’t looking at the governance of a company and its risk. That is the point at which we took out credit insurance. Currently, 90% of our export business is to non-EU countries. Taking out credit insurance gave us the confidence to export across the world. I only wish I’d begun exporting a lot sooner.”
Q: Have you ever had to claim on your credit insurance and if so, what happened?
George: “Yes, in November 2017, about ten years after we took out the credit insurance, we were involved with a company called Palmer and Harvey. We were introduced to them by a retailer who used them as a distribution arm. When Palmer and Harvey went under, we got sucked into the loss through no fault of ours or even the major retailer they served. It’s this linkage that you can’t recognise – the end user may be perfectly sound, but they may in turn put you through a distribution arm and it is they who may be working on very fine margins and other issues can hit them. It was a significant amount, a six-figure sum, which, had we not had credit insurance, would definitely have hurt us. We probably covered two to three years’ worth of premiums in that recovery; the pay back of having credit insurance came through that protection.”
Q: How much does your credit insurance cost you?
George: “0.06% of our total business. Currently, our largest debtor owes us £2 million. I can sleep at night because I know that debt is insured. Now is the perfect time to take out credit insurance, build the cost into the price of your product and start to do business with profitable, stable, cooperative businesses that are our future.”
Q: Apart from protecting against financial loss, are there any other benefits to having credit insurance?
George: “Absolutely yes, there are multiple advantages and at many stages of the business.
- Having credit insurance means I can have open and honest conversations with my clients surrounding their orders. If I know I’m covered for the size of their order, then I’m happy to do business with them, knowing exactly how much I’d lose if there was a problem.
- It means I have peace of mind, I can relax, knowing someone else has done the research into that company even those abroad; they will give me a view on them before I’ve traded a single penny. Exceptional intelligence across a global view that I could not possibly have achieved on my own or with my staff.
- It moves me into the art of the possible. It turns me as the supplier into the hunter, not the hunted. I don’t have to worry about chasing up payments anymore, and if someone wants to increase the size of their order great, they’ll need to provide the insurers with more paperwork to prove they can afford it. It gives me great confidence to do business going forwards, knowing I’m protected.
- Banks love knowing we have credit insurance, they offer us invoice discounting as they know we are working in a very professional manner and taking the correct advice.
- I know my staff and business are protected. Ours is a local business employing 210 people, 170 in one town alone. My staff have mortgages to pay and families to feed; having the credit insurance means I know I am doing the right thing for them and for the business. I see myself as the custodian of this business, it will carry on for many years once I’ve gone and my duty now, as Chairman, is to keep the business safe.
- Having credit insurance allows me to sleep at night rather than worrying about £10 – £12m of outstanding debt and what would happen to my business and my suppliers if it wasn’t paid.
Q: What advice would you give to a business owner who doesn’t currently have credit insurance?
George: “Get yourselves insured for your own best interest. I want to see all businesses, particularly family businesses, thrive and survive. It’s tough enough with the post-COVID challenges, we need to have the protection of credit insurance around us. It changes the focus, are you playing defensively or to the offence? I feel that once I have the strength and security of credit insurance around me, then I know that the limitation of my loss is crystalised, I can work within that. Previously a business could maybe have traded out of a large loss from an unpaid bill but not today. Today, we are dealing with such an extraordinary set of circumstances post COVID-19, the lack of labour, materials, packaging and transport – that ability is seriously diminished. Our policy cost just 0.06% of our total business. Build that into your sales and get yourselves insured. Why wouldn’t you? The risks are much greater these days and having credit insurance is as close to a no-brainer as I can get.”
To us, insurance is not just a transaction. We believe that the right advice can make a real difference to your insurance outcomes.
We are exceptionally grateful for George for his time. His experience, pragmatism and passion for his staff and company are inspiring and we appreciate him taking the time to share his experience with us. We cannot recommend this video highly enough to anyone contemplating credit insurance for their business or who is simply interested in hearing about the increased risks of running a business in this post-covid era.
If you are looking to explore how you might be able to de-risk your credit line speak to us today. We’ll take time to discuss your specific risk exposures and tailor your cover so you can be more confident your insurance will deliver on its promise.
Stream the full webinar on-demand, here.