Company
Aviation
Fuel Wholesaler
Situation
Largest
independent wholesaler in the industry, experiencing good
growth prospects with a strong balance sheet. Low margins
and high exposures resulted in peak seasonal demand being
held down by our prospect because of potential catastrophic
credit loss.
Operating
Facts
Annual
Sales: $150 million, Average Accounts Receivable: $8.3
million, Gross Margin: 7%, Net Margin <1%, Account
Turns Per Year: 18, Credit Function Handled By a Full
Time Credit Expert.
Objective
The
company had sophisticated methods, and personnel, in place
to manage the expected credit risk within their customer
portfolio. They were interested in a program that would
eliminate the potential catastrophic risk of an "unexpected"
situation.
Solution
Implemented
a credit insurance program that covered all accounts for
their projected peak exposure, with a significant first
loss position maintained by our client - truly a catastrophic
program. The deductible level was established per our
client's ability to withstand the loss, any loss above
the deductible would be covered by the program.
Results
Instead
of limiting peak seasonal sales, our client confidently
entered into sizable contracts which produced incremental
profit that far exceed the cost of the program - providing
catastrophic loss protection, reduced bad debt allowance,
and enhanced their ability to negotiate with their lender
- all for a true "zero net cost"!
