The Avoid the Non-Payment Iceberg webinar took place on May 21, 2019 and featured a discussion with industry experts Dan North, Stephen Georgetti, Yaye Essayas, and Kip Fournier. Topics included how to implement new policies that could further protect your business from non-payment, tips and tricks for A/R risk mitigation, sector-specific insights, and observations on the current and future state of the North American economy.
Here are the questions and answers that were asked during the webinar.
Q: If there’s been no inflation, why has the Federal Reserve been raising interest rates?
Dan North: “It’s true that inflation has been very weak, but for the Fed Reserve, they have a tricky job. They’re trying to balance the economy between running too hot and too slow; however, it takes a long time for their actions to go into effect. For instance, suppose they think the economy is starting to run too hot, so they raise interest rates. The effect of that interest rate hike doesn’t get felt for an entire year throughout the economy. They have to think about inflation a year from now, not inflation today. And they’ve been seeing all kinds of signs that would typically say inflation is on the rise— as a 49-year low unemployment rate, for instance.”
“It takes a year for those actions to take place. Now you remember the Fed last year raised interest rates four times, the last two times were in September and December. Those hikes haven’t filtered their way through the economy already. In other words, there’s still monetary policy tightening in the pipeline. This is one of the reasons we are concerned about late 2019 or the first quarter of 2020, where we could really see a significant slowdown.”
Q: Does Euler Hermes alert its clients of uninsured customers who are not paying others, or is the data only used to figure out how much coverage they’re willing to provide? This is in reference to past due reporting data.
Stephen Georgetti: “We do not disclose the nature of the past due reports on a per company basis. That is confidential information. However, what we do share is aggregate at a sector level—like what we showed today. If we decide to action coverage, we can disclose that it’s because of slow payments, but we can’t disclose from which supplier. We provide great information at the aggregate level, which will manifest itself in individual credit limit decisions.”
Q: How do you still collect with a big company when they won’t return your calls and/or paperwork?
Kip Fournier: “Unfortunately, if they're not returning your calls or paperwork, you may already have a problem. This is where I mentioned that most credit policies deal from today backward instead of today forward. You want to ensure that you follow the correct procedures up to that point. But if you have a valid claim, this is why people purchase trade credit insurance because there are several mechanisms that we can put into place to help you collect that debt either through direct collections, or if it can't be collected, we, as I mentioned before, will simply pay you for that invoice.”
“More importantly, the real advantage we have is we take that data and turn it into actionable information beforehand. We might have been able to help you figure that out a buyer’s non-payment behavior before you ever sold to them.”