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INTERNET BUSINESS
UK Bosses Not Ready for E-Business
A report due out this Tuesday
(28th) will confirm some of Tony Blair's
recent concerns regarding the lack of
e-commerce knowledge and experience within
UK businesses. The report, backed by the
Institute of Directors and the Department of
Trade and Industry, claims that businesses
on the Continent are twice as prepared as
their UK counterpart's to understand and
react to e-commerce.
.uk
Third Biggest Domain
The number of '.uk' domain
registrations are now in excess of 200,000,
placing the '.uk' domain third biggest in
the world. The German domain of '.de' is
second with 235,000. Not surprisingly,
'.com' is number one with 2m.
FINANCE
Freeserve in
Free Fall
Freeserve, the UK's first
free Internet service provider (ISP), has
suffered a set-back this week when their
over-hyped shares fell to a low of 125p, and
finished the week at 135p. The flotation
price of 150p per share gave the average
investor with 500 shares an immediate gain
of £277: those investors now stand a loss of
£75.
Free Shares
for All
With the rush of free ISP's,
the inducements on offer for customers to
sign up has entered into a shares for all
battle. You can receive 10,000 'units' from
Blue Carrots, and Totalise will give you 250
shares, worth £75, that many users have
traded in. They are:
totalise or
breathe internet
THIS WEEKS TOPIC
UK Trade Credit Insurance
The question of credit
insurance is a difficult one within the
small business. Can you as a small business
owner afford to pay a premium to an
insurance company for the protection of your
most valuable balance sheet asset: CASH?
If, for instance, you are a
manufacturer, and you have invested in raw
materials, production, delivery costs,
administration and finance costs etc to
supply your customer with 5000 gadgets, and
you then deliver those goods on 30 days
un-insured credit: it could be argued that
you had lost control of your senses. Your
company has invested significant funds in
the belief that you 'know' your customer
will pay! No doubt certain checks were made
as to the solvency of your customer, and you
saw nothing that would stop you from
delivering those goods. There is nothing
wrong in thinking like this: after all over
95% of UK trade (excluding export) is
conducted without credit insurance.
Generally, if you offer
credit terms to your customers you will
increase your sales (the problem is you will
also increase your bad debt). Is it an
acceptable cost to insure those credit
sales? If you maintain the average annual
company bad debt of 0.7%, and with the
average annual insurance charge of 0.7% of
turnover, the answer begins to sound
obvious, 'yes'. Plus you will have the added
benefit of extended cover across your
debtors as a whole.
Credit insurance is designed
to cover, usually for twelve months, a
supplier of goods or a service from bad debt
arising out of an act of insolvency (see
Insolvency section). The company will
have a turnover in excess of £250,000. All
of your customers can be covered, or just
your top customers (definitely not just your
worst customers). You can expect 80 - 95% of
each debt to be covered. You can expect to
be paid by the insurer about thirty days
after insolvency has been confirmed by the
insolvency practitioner (this in practice
could add up to 4 - 9 months after
invoicing).
Premiums will cost between
0.3 - 0.7% of annual turnover (or turnover
of your top customers if you only insure
that part of your customer base). The policy
works by individual credit limits attributed
to your customers. The limits are pre-set,
and you can trade within the credit limit
throughout the year without further
reference to the insurer. You can request an
increase in the credit limit. You are
expected to have an effective working credit
policy (see
Credit Policy section).
Premiums can be paid
quarterly, in advance. Remember, if you
increase your credit sales you will increase
your premium.
A note on export credit
insurance. Many unforeseen and disruptive
circumstances can appear in the world today.
As we have seen of late, this is not
confined to third world countries. War,
political unrest, military coup d'état,
fraud, and all the problems any business in
the world can suffer makes export sales
without credit insurance: business suicide.
Many suggest that your initial sales are
covered, and evaluate at a later date when
you have a high degree of trust.
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