Avoid Bad Debt and Strengthen Business Partnerships

 

Innovative logistics provider OTR Transportation learns that credit insurance does much more than protect A/R.

 

Industry:

Transportation & logistics

Challenge:

Avoiding future bad-debt situations with a better credit checking process

Policy Benefit:

Stronger sense of partnership with carriers

Challenge

After two bad debts with two major clients led to tens of thousands of dollars in losses, OTR Transportation was done managing credit risk on its own. In addition to the financial losses, “we looked at the time and energy that went into trying to collect those receivables,” said Jonathan Braun, the company’s founder and director of procurement. “We got burned in that way too.”

OTR is a logistics provider that finds and sources trucking capacity to move freight throughout North America. OTR has carved out a logistics-provider niche by connecting smaller trucking operations with customers who appreciated that reliable freight-hauling options don’t begin and end with the big names in trucking.

“By understanding the particular needs of the smaller trucking company, we’ve identified synergies and properly aligned payment terms so that we can become a real partner to them,” said OTR broker Jeffrey Roadman. “We’ve been able to adjust our payment terms and still pay quickly, allowing their business to thrive.”

“We wanted to grow with each of our customers so we wanted different thresholds for extending credit without putting anyone’s growth at risk,” said Jeffrey Roadman, OTR Broker

 

Solution

Avoiding bad debt and paying promptly is a key part of OTR’s strong working relationships. If OTR is to provide faster payments to its carriers, it must have a healthy cash flow itself nurtured by prompt payments from customers. “We are not a credit company. We don’t have the resources and access to the necessary information,” said Braun. “We realized that we needed to focus needed on what we do best and to find credit support with a company doing what it does best.”

After a referral from one of its most important customers, OTR approached Euler Hermes about credit insurance and found so much more. For example, OTR had performed its own credit checks by using a credit information agency’s services and calling multiple references, which was a time-consuming process. As OTR grew, its staff began to be pulled in many different directions, causing an already imperfect credit-checking process to become even less efficient. “You’re wasting time and time is money so there’s an opportunity cost,” said Braun. “Your time is better spent elsewhere.”

Credit insurance also proved to be flexible. “We wanted to grow with each of our customers so we wanted different thresholds for extending credit without putting anyone’s growth at risk,” said Roadman. “We’ve seen brokers and trucking companies go under because customers didn’t pay them.”

Results

Credit insurance brought the peace of mind of knowing OTR’s receivables were protected from bad debt. But perhaps the most significant benefit of credit insurance is the fact that OTR can confidently add customers as its services became in higher demand. “We’ve been able to promote a scalable growth trajectory, to which our receivables coverage is one of the contributors,” said Roadman. “We don’t have to hesitate when new business opportunities present themselves.”

OTR gives major credit to EOLIS, Euler Hermes’ online policy management system, and its EZ Cover tool for quick credit decisions on new customers not already named in their policy. “You can get an answer on credit coverage within minutes, which is important in a fast-paced industry like ours,” said Braun. “If a new customer offers us a shipment and we need to get that pushed through credit ASAP and, in most cases, we can.”

OTR has even taken to leveraging its relationship with Euler Hermes as a marketing tool. The company discusses its credit insurance coverage prominently on its website. “We saw accounts receivable coverage with Euler Hermes as a value-add offering for our carrier providers” said Roadman. “By insuring our receivables, we are insuring ourselves to be able to pay them.”

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