Fighting the Scourge of Late Payments

Why credit insurance is the answer for small plumbing businesses, according to Andrew Garvey, Chief Operating Officer at Countingup, and Richard Thomson, co-founder of Hokodo.

The late or non-payment of invoices has long been a concern for the UK’s plumbers. 2016 research from EC Insurance Company (ECIC) found that late payments were an issue for 62% of plumbers, while close to a fifth (19%) said they struggled to pay for supplies because their cashflow had been impacted by late payment, and almost a quarter (23%) had to fund specific resource just to chase outstanding payments.

It can be especially difficult for the smallest plumbing businesses to tackle the issue, especially if the worst offenders are large commercial enterprises that are also their biggest customers. For these plumbers, the negative impact on cash flow often has an especially serious impact and can even result in bankruptcy.

Yet, a solution already exists to the problem of unpaid invoices: credit insurance.  By insuring their invoices, businesses can recoup what they are owed even if the customer does not pay or goes bust. In the past though, small businesses, including plumbers, have often struggled with getting easy access to credit insurance.

Today’s credit insurance policies are just not set up to meet the needs of small plumbing businesses. Typically, they are based on expensive ‘whole turnover’ policies, meaning all invoices are automatically – and unnecessarily – covered, and sold via inaccessible channels such as brokers and offline.

That’s tended to preclude a large part of the market from taking them up. Recent figures from the Association of British Insurers indicate that there are just under 14,000 trade credit insurance policies in place in the UK. Most are likely to have been sold to large businesses. Very few to cash-strapped plumbers who might be among those most in need of these kinds of services.

The truth is that historically, credit insurance providers and brokers have ignored the small business market in favour of large corporates. As a result, small plumbing businesses often know very little about credit insurance. As and when they do find time to look into it, they often come across offerings completely unsuited to their needs.

Fortunately, help is now at hand. We are now seeing fintechs [financial technology] joining forces to protect small businesses, including plumbers, from running into cash flow problems through missed or late payments. A new brand of invoice protection is emerging that allows small plumbing businesses to quickly pick and choose the invoices they want to protect. 

Rather than simply insuring all their accounts receivable, they can choose which invoices they want to protect based on criteria like: Can I afford to write-off this invoice, or am I comfortable with how this business trades? Once they have decided, plumbers can then purchase and pay for invoices individually through a simple tick-box process at cost-effective prices per invoice. By partnering and integrating payment protection with banking and accounting apps that plumbers are beginning to adopt, they can further streamline the experience for users and expand its reach across the plumbing sector.

That is a positive development.  The health of the whole economy depends on the entrepreneurial spirit enshrined within SMEs such as small plumbing businesses. It is important that they thrive. The latest insurance protection tools help them do that by reassuring them about their finances and helping them focus instead on delivering the best possible customer service and building on their business success.


About Hokodo
Hokodo is a technology company that aims to make financing and insurance available to the many SMEs left behind by today’s financial services industry. Hokodo provides B2B marketplaces and other platforms with transparent, easy-to-integrate financing and insurance solutions. The founding team combines business and financial services knowledge with deep tech, design and data science skills. For more information, please visit www.hokodo.co

About​ ​Countingup
Countingup is the UK’s number 1 banking and accounting app for freelancers and small businesses. Tim Fouracre created the company in September 2017. Countingup is venture capital backed. For more information, please visit www.countingup.com

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