All posts tagged: credit insurance

Business agility is integral for survival

June 4, 2020 LCI-news, News No comments

business-agility-keep-business-afloat-tips

Today’s business environment requires companies to become more agile and adapt to the growing list of challenges brought on by geopolitical and economic issues. Whilst external factors are generally out of company’s control, businesses need to find ways to become more competitive to survive and grow in such a climate. As we have seen, the COVID-19 pandemic and its repercussions have changed industry trends globally, as well as consumer needs and market dynamics, and has forced companies to look inwards and find ways to optimize their systems and procedures.

How can companies become more agile?

Tips and tools to increase agility within an organization

For businesses to become more agile, a shift in thinking is required. Agility means companies regarding innovation, collaboration and forward-thinking as the core pillars. Strategies need to adapt to respond to market dynamics and emergent industry trends and team members should be empowered to take the lead. Here are some tips for companies to become more agile, and navigate through current and imminent challenges:

Change your business approach

Companies that have been in business for decades find it more difficult to adopt new technologies and change the way business is being done. Internal transformation may seem like a far-fetched and strenuous task. However, as global crises have shown, is that even the most lucrative businesses with a huge market share, can become obsolete if they do not adapt to consumer and market needs. Companies should reassess their industry and sector, as well as market presence, and understand what their customers need today and in the near future.

A shift in strategy then follows

Once a company understands the market dynamics and where value can be added, strategies need to shift. To effectively respond to these changes, a company first needs to look inwards at the roles and responsibilities of every department. Can the way business has been carried out be enhanced? Can a product be improved on? Does the service deliver customer value? Can what we offer, be found elsewhere? Once a new strategy is crafted, it needs to be regularly communicated with the team to gear them towards the same direction. Responsiveness and swift decision making capabilities are key for companies to become more agile.

Ensure innovation is a corporate commitment

Responding to a crisis and finding the tools to survive it, is one part of the challenge. The second part is to remain relevant and ahead of the competition. Therefore, innovation and continuous improvement should be at the core of every organization. Companies should set up innovation hubs and allow team members to share their ideas on how products and services can be improved. This step could even entail digitizing one part of your offering, to facilitate and enhance customer relations. Large organizations are teaming up with experts in different fields, to gain the experience and insights of ‘outsiders’ to improve their offering.

Doing more, with less: The 80/20 rule

Being agile means creating a value-driven model, and delivering products, services and solutions that provide the highest return on investment. If a certain offering, service or client profile or is draining your finances and resources, and exposing you to heightened risk, it should be assessed carefully. In some cases, eliminating it may result in higher profitability if strategies properly shift. Referring to the 80/20 rule, derive ways in which the 20% of the work put in, creates 80% of the value.

Find ways in which you could ultimately do more, with less. The stringent approach to cutting costs should apply, even when not in crisis mode. The roles and responsibilities of team members should adapt based on the new strategy laid out, and multidisciplinary teams should be created for expertise to be shared. Team members should also understand their roles within the new setup and have targets to work towards.

Moving forward to become more agile

Becoming agile requires companies to honestly and openly look at their existent framework and offerings, and be open to change. Change should impact both the mindsets and strategies, as well as methodologies to reach new targets. As we have seen, unexpected events can send even the most resilient companies into crisis mode. Therefore, anticipating potential challenges and threats and adapting to them before they emerge, is advisable.

How to manage debt collection, in times of crisis

April 21, 2020 LCI-news, News No comments

In times of crisis, business strategies need to shift, and internal processes need to take on a new direction. With widespread office and business closures across the globe, debt collection and credit management may become even more challenging to carry out.

Whilst public health is predominantly at risk, due to the spread of COVID-19, the global economy is being threatened, due to the extensive measures being taken to contain the virus. Businesses are feeling the impact of the imposed governmental closures, shifting to virtual platforms to continue with operations.

As SME specialists, LCI and LCI Services continually advise companies on how to structure their internal processes, pertaining to debt collection and credit management. However, during the spread of the COVID-19 pandemic, shifting strategies is important. Here are expert tips to support companies in navigating during these difficult times.

The first debt collection strategy for pending sales

During times of crisis, both the buyer and seller are enduring difficult times. It is important to keep that in mind when approaching clients to settle due payments. Clients will be faced with growing challenges to settle their invoices due to a lack of liquidity and can have valid objective reasons about why they cannot pay.

In a period of uncertainty and instability, fostering human connections in business is important. If you find that your customer is unable to meet or comply with existing agreements – talk to them. Approach your customers in a friendly way, and try to understand their situation. If they are unable to pay invoices within the scheduled timeframe, here are tips that you can follow to preserve the business relationship.

If your clients have cash flow difficulties

In the case of pending or ongoing sales, it is important to be more diligent when following up, yet taking into consideration the situation of the market and your respective clients. Try to uncover the situation of your clients and if they are facing cash flow difficulties.

Invoice on time

If you are carrying out your services as per set agreements, or continuing to deliver goods to clients, ensure you invoice on time. Maintain the regular flow and procedures, even if you know clients cannot pay on time.

Extend credit terms

With the impact of the ongoing economic crisis, exasperated by the COVID-19 pandemic, businesses will have an even harder time to pay on time. It is recommended that you adopt a more lenient strategy. This includes extending credit terms and setting new payment cycles that suit both parties. When a new payment arrangement is being devised, check the feasibility of its terms for both parties. Run a credit check on your customers, to gain additional insights on their financial standing.

The second debt collection strategy for new sales

For all new sales orders, companies are advised to adopt a different approach. In general, practicing proactive credit management with regards to new sales is strongly recommended.

Accept cash

Accept cash payments for new orders, in the local currency. For companies operating in Lebanon, allow clients to pay in Lebanese pounds, and agree on a suitable exchange rate for both parties. For clients outside your jurisdiction, accept bank transfers, and check with your bank if you will be able to access the amounts online, as a result of the closures.

Ensure you can meet agreements

If new orders are received during the crisis, ensure you can meet the set agreements before committing to them. It is advisable to have clear and open channels of communication with your customers, to safeguard current and potential business relationships.

In addition, check with your suppliers if they can deliver on time before committing to a delivery order. Discuss payment terms with them to manage expectations, which can include paying in installments.

Additional advice for companies to remain afloat during COVID-19

Manage cash flow by reducing expenses

During difficult times, businesses should work on reducing expenses across all levels. In addition, businesses are advised on hold onto cash reserves, to maintain liquidity within the company. Project cash flow levels over a period of 3 months, 6 months and a year, to provision for continued closures and the respective impact on your business.

Settle debts

If you have pending debts to be paid, ensure they are settled. Mounting debt can severely impact your company’s financial standing, and it could be subject to high interest rates. If you are unable to pay due debt on time, talk to your financial institution or supplier, to negotiate extended payment terms.

Adopt E-invoicing

The spread of COVID-19 has contributed to speeding up the digitization of the economy, particularly in countries that were behind. In addition, due to company closures, courier services have come to a halt. As such, e-invoicing is recommended. However, to ensure company e-invoices are enforceable, include the following:

Buyer and seller name
Invoice number (based on your internal ERP systems)
Company tax ID
Registration numbers of both entities
Detailed description of the services and products being sold, along with unit price of either
Country of origin
Tax rate and amount applicable
Payment terms

Get in touch with LCI and LCI Services’ teams to learn how we can support you with debt collection, credit information and how to grow sales through exports.

IFRS 9: How will the approach to credit risk change?

October 3, 2019 LCI-news, News No comments

Risks associated with trade credit have taken on a different angle, with the introduction of new standards under IFRS 9.

Various geopolitical, economic and financial risks have prompted international bodies to approach risk appetite and mitigation in a different way. A recent introduction by the International Accounting Standards Board (IASB) pertaining to the International Financial Reporting Standards (IFRS 9), will change the way companies and credit insurers manage credit risk, and how they provision for it.

The key addition is the Expected Credit Loss (ECL) principle, added to ensure that companies and credit insurers integrate vital processes to comply with the ‘expected credit loss impairment principles’.

The key points in IFRS 9

Financial and non-financial organizations take note

A multitude of businesses will be impacted, with regards to the compilation of credit information. Companies will need to enhance credit information systems and procedures to collect data, as part of IFRS 9.
Companies will be required to provision for potential losses based on information and forecasted data. The loss ratios pertain to receivables that are not yet deemed overdue.
Under IFRS 9, additional requirements have been added, to include in the periodical financial statements.
Credit management systems within companies, as well as accounting policies will need to be changed to adapt to the new standards.

Credit risk management will be approached in a different way, in order to safeguard the health of the financial industry. However, a key criticism to IFRS 9 remains the various interpretations of the principles, as stipulated under the standards.

How can credit insurance help?

Credit insurance can help companies waive the impact of provisions under IFRS9 for their receivables.

To learn more how LCI can ensure your company’s trade receivables, support you in shifting to new standards and preparing your company to integrate IFRS 9 standards, do get in touch with our team on: info@lci.com.lb or visit our website: www.lci.com.lb

How SMEs can scale up their businesses

August 29, 2019 LCI-news, News No comments

6 tips to help companies scale up and grow

Small and medium sized enterprises (SMEs) can work on various levels to scale up their businesses, both domestically and in international markets. As SME experts, LCI’s team gathers daily insights, from monitoring over 16,000 companies, and continually identifies key areas of focus, to aid businesses to scale up.

Here are 6 tips to help companies to scale up:

Adopt the digital trends

Every company needs a strong online presence, being the first place customers research a product or service. Developing a user-friendly and attractive website helps to position your company in a positive light. Websites and social media channels can be effectively used to update clients on the latest developments and widen your audience globally through targeting. To effectively use digital mediums, ensure they are up to date and position your brand in a unified manner.

Focus on your strengths

Identify your unique selling proposition and capitalize on it. What strengths does your company have, that others do not? Focus on that in your communication efforts, both online and offline.

Costumer service translates into loyalty

Ensure your customers are well taken care of, from when they are deciding which product or service to purchase, until after transactions are made. By creating a two-way flow of communication, along with add-on services, customers will feel closer to the company and likely repeat purchases.

Identify new opportunities and markets

Whilst expanding into new markets is integral for companies to scale up faster, it comes with many challenges. Before venturing into new markets, research local competition, risks and the market appetite for your product or service. Is there strong demand for what you are offering? Are there cultural norms that you need to adapt to? Know the market well before expanding.

Standardize your processes

When scaling up a business, systems and processes that are standardized will ensure a more seamless experience internally. From financial elements, credit management, to paperwork, systems and delivery processes – develop a system that is followed across all markets, to create a unified experience.

Manage trade receivables and cashflows

Whether selling domestically or internationally, managing your trade receivables and cashflows are integral to scale up. Provisioning for upcoming expenses, whether investments in human resources, marketing or business development, if you have a clear forecast of your receivables, it can ensure a healthier cashflow.

Learn more about how LCI can help you expand to new markets and increase your exports here.

Strengthening partnerships in Egypt

April 2, 2019 LCI-news, News No comments

LCI’s General Manager discusses innovation in trade receivables management

LCI took part in the official conference hosted by GIG Egypt and the Ministry of Trade and Industry in March, 2019. The aim of the conference is to strengthen investment and collaboration opportunities between Egypt and Syria. LCI’s General Manager, Karim Nasrallah, shed light on the innovation in trade receivables management, to drive trade globally.

LCI launches TAJER supporting SMEs, the main drivers of the MENA region’s economy

October 18, 2018 News No comments

TAJER: The simplified trade credit insurance policy helps support SMEs in their growth and expansion strategies

The Lebanese Credit Insurer (LCI) has launched TAJER, an innovative, simple and efficient credit insurance policy for Small and Medium-sized Enterprises (SMEs) operating across the MENA region, providing cover for their trade receivables. Utilizing LCI’s expansive market intelligence, including the active monitoring of 16,000 companies focusing on their payment behaviors, TAJER will aid SMEs in growing their businesses and ensuring they get paid for the goods and services they supply.

“SMEs make up a major part of the MENA region’s economy, and in Lebanon, they comprise an estimated 80% of companies. Yet, only a small percentage of them are covered against the risks of non-payment,” said Karim Nasrallah, General Manager of LCI. “As such, we want to support them in their expansion into new markets and in growing their client portfolios. TAJER gives SMEs the confidence to look at new opportunities in their local markets and abroad, and focus on their growth,” he added.

The Middle East and North Africa (MENA) region has undergone a series of transformations in recent years, impacting the way businesses operate. LCI’s Risk Department market analysis shows that the risk of payment defaults is increasing, impacting the trade receivables of companies across the region. The highest risks in the market are impacting SMEs, rather than by bigger corporations, especially as they expand their market coverage and export to the different parts of the world – a move needed to optimize revenues and generate profits.

SMEs in Lebanon, as well as in most markets globally, employ the majority of the workforce, and play a major role in creating job opportunities. They are the institutions that fuel the economy. Lebanon is known to have one of the biggest densities of established business owners, not only in the MENA region, but even globally, based on official figures.

Seeing that there is a scarcity of available information (financial and other), the only way for credit insurers to underwrite risk is to conduct research via on-ground visits to companies, to understand, based on their sector experience, what is the potential opportunity and credit worthiness of each entity. Monitoring is also segmented by sector, trade size, company size and country location.

With TAJER, the straightforward and flexible insurance policy covering a company’s biggest asset, its trade receivables, many benefits will be offered which include:

Increase sales, by extending credit limits to existing clients and reconciling between the sales and risk departments
Manage risks, by accessing a large database of information and intelligence on thousands of companies
Be more competitive, by extending payment terms for new and existing clients
Protects against bad debt, by securing cash flow and optimizing financial planning
Achieve better borrowing from banks, turning trade receivables into good quality collaterals, allowing companies to negotiate better borrowing terms

[Blog] How is the ongoing trade war impacting the MENA region?

August 6, 2018 News No comments

The trade war between the US and China has been making global headlines in recent months. The headlines then turned into action, with the US implementing a 25% tariff on Chinese exports, worth billions of US Dollars. China responded with a similar approach – and the trade imbalance between the two countries became even more evident.

The world’s two largest economies found themselves in a trade war, which many economists say, will negatively impact the GDP of both countries and will slow trade growth in the long-term.

However, as the world watches on as the two nations battle it out publicly, some experts are analyzing the potential impact of the trade war, on the Middle East. When it comes to the MENA region, whilst the trade war seems like a distant battle, repercussions are already surfacing.

Countries in the MENA region may be forced to take sides, fueling the trade war further. In addition, as the US and China advance further into their battle, they may adopt a protectionist approach, to safeguard their country’s industries. This will lead to a decreased demand for goods from Middle Eastern markets, such as the oil exports from the region into China.

The full extend of the trade war between the US and China is yet to be seen and felt. Let’s hope that an amicable solution is found, before the trade industry is disrupted completely.

LCI and SACE sign cooperation agreement

June 12, 2018 News No comments

LCI and SACE have signed a cooperation agreement, to enhance trade opportunities between Lebanon and Italy by supporting SMEs. The expertise and know-how of both entities will be extended to SMEs, along with training programs and technical assistance offered to financial institutions and commercial banks, as result of this agreement.

SMEs make up the majority of business institutions in both Italy and Lebanon, employing a large proportion of the national workforce. Thus, supporting their growth and enhancing trade opportunities, through trade credit insurance and the sharing of expertise, contributes towards a more prosperous economy.