All posts tagged: trade credit insurance

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

Digitization will impact the trade industry

March 11, 2019 LCI-news, News No comments

Every day, fleets of huge ships dock in ports over the world and every hour, a plane carrying cargo lands, in one country or another. With every docking and landing, a stack of paperwork will need to be processed. Whilst this practice has been the standard process adopted by governments and countries for decades, the cost of processing trade documents still remains high.

Based on figures released by the World Economic Forum, the cost of processing the paperwork for shipped goods, can reach as much as one fifth of the cost of shipping the actual goods. Many institutions, including banks and technology companies, are trying to streamline this process, as the benefits are numerous. Experts indicate that simplifying the administrative procedures can actually lead to notable growth in international trade.

Apps, technological innovation & block chain solutions are simplifying procedures of shipping goods.

In comes digitization, which is already underway in the trade sector. Apps, projects, technological innovation and even block chain solutions are simplifying the once complex administrative procedures of shipping goods. Electronic-based documentation lowers costs, simplifies workflow, and takes up less time in terms of analysis and storing. Depending on the electronic documents along with the use of standardized ID numbers for transactions, traders can benefit from a smoother process, expand to new markets and deal with new clients, with less requirements when it comes to due diligence, collecting and tracking credit, performance and commercial dispute data.

The advantages of digitizing the trade sector are clear, but will governments and private institutions move fast enough?

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

LCI appoints Dominique Charpentier as its new Chairman

June 28, 2017 News

The Lebanese Credit Insurer (LCI), has appointed Dominque Charpentier as its new Chairman at its Annual General Meeting held in May, 2017.

Charpentier led a seasoned career with extensive experience in the realms of finance and credit insurance, having held senior financial positions in corporations, namely CFO of SCOA and PINAULT Groups and then moving on to become Deputy CEO of Société Marseillaise de Crédit. In 1995, Charpentier ventured into the Credit Insurance industry, within the Euler Group where he was successively Deputy CEO of Cobac Benelux, CEO of Société Française de Factoring and CEO of Eurofactor. In 2002, he moved to Atradius Group, assuming the role of Managing Director of several divisions of the Group: Atradius Factoring, Atradius Bonding, Atradius Instalment Credit Protection and Atradius Credit Insurance Italy.

He then joined the Management Board of Atradius as Chief Insurance Operations Officer in 2013.

Throughout his career, he held numerous Board member positions in professional organizations across Europe, of which: In France, as Director of Association des Sociétés Financières (ASF); in Belgium as Director of Beroep Vereniging van het Krediet (BVK), and on an international level as Director and Chairman of International Factors Group (IFG).

In January 2017, Charpentier retired, and now serves as Chairman of the Supervisory Board of Graydon Holding NV in the Netherlands and has been newly appointed as the Chairman of LCI.

Charpentier graduated from Institut d’Etudes Politiques de Paris.

In his capacity as Chairman of LCI, Charpentier will bring his wide experience to support the company in implementing its growth strategy and in its development and expansion. Charpentier succeeds Gerard van Brakel who has been chairing LCI since it was founded in 2001.