Coface UK's flexible credit insurance solution enables furniture manufacturer to reduce exposure on high-value customer accounts

Morris Furniture & Co

• Company: Morris Furniture, a long-established, Glasgow-based furniture manufacturer, whose MD was recently voted Scottish Entrepreneur of 2002
• Business challenge: How to cost effectively minimise the risk on high-value accounts, as part of an overall credit management policy.
• Solution: Coface UK's Top Trader, a flexible credit insurance policy which covers a limited number of high-value accounts, combined with strict in-house credit management.
• Result: Morris Furniture benefits from security of proven cover on main customer accounts and the opportunity for in-house credit team to focus on managing ad-hoc accounts.

The Company

Established in Glasgow over a century ago, and with a staff of 500, Morris Furniture has built an enviable reputation for supplying quality furniture, including the well-known G-Plan brand, as well as a high level of customer service.

The company supplies a variety of markets, primarily in the UK, but also to customers in the USA, Germany, Ireland, as well as to other countries within the OECD. Its craftsmanship can be seen at prestigious locations such as The Queen Mary - now a floating tourist attraction – and the offices of Encyclopaedia Britannica. It has several routes to market: clubs and pubs are serviced directly; offices, through dealers and architects; and the domestic market, via furniture retailers.

In recent years, Morris Furniture has enjoyed consistent growth, and the company now has an annual turnover of £40 million. Indeed, so successful has the company been that its joint Managing Director, Robert Morris, was recently awarded the title of Scottish Entrepreneur of 2002.

The Business Challenge

In 1989, Morris Furniture had enjoyed several years' excellent growth and the senior management team had the opportunity to review the business, including its credit trading policy. It was decided that if the business was to continue to grow profitably, action needed to be taken in order to enhance the security of its sales ledger.

One key element would be to improve the quality of debtors by increasing scrutiny of its customers before offering credit terms. Another was to arrange credit insurance on the higher-value accounts which exposed the company to excessive risk.

In short, Morris Furniture wanted a flexible and cost-effective alternative to a 'whole turnover' policy so the company turned to its broker, David Blears of the Stirling-based Corporate Services Bureau, for advice.

The Coface UK Solution

Already a long-standing customer of Coface UK and its predecessor Coface LBF, Morris Furniture were very interested to hear about the company's Top Trader Policy, specifically designed for companies who derive a large proportion of revenue from a select number of customers.

Top Trader enables Morris Furniture to choose which and how many of its customers to insure and the level of its exposure, enabling the company to pay only for the cover it needs. The remainder - smaller customers and ad-hoc sales – can then be self-insured by the business.

As part of its credit policy, Morris Furniture refuses to rely on trade references. Instead the company makes Coface UK's credit risk assessment service the first port of call for stringent credit checks on customers. More importantly, it has been prepared to withdraw its credit facility where necessary.

The Result

Since it became a Top Trader customer, Morris Furniture has made around 30 successful claims, with Coface UK paying out up to 85% of the account value. In one instance, Coface UK paid out £85,000 when one of their customers went into receivership.

While this can't compensate for the loss of business, spreading its risk has inevitably insulated Morris Furniture from the worst effects of payment default. At the same time, having the flexibility to choose the level of its own cover, has made credit insurance an altogether more cost-effective option.

Coface UK's account team has worked closely with Morris Furniture and its broker to answer any queries and on some occasions, where cover has been withdrawn, it has been prepared to listen to arguments and reinstate cover if appropriate. Meanwhile, for its part, Morris Furniture's team of credit controllers has been able to focus fully on chasing overdue accounts and resolving any service issues which may have arisen.

Overall, Morris Furniture has been delighted with the level of protection offered by the Top Trader policy and by Coface UK's proactive approach:

"We are very pleased with the way the Coface UK team has worked to enhance their relationship with us; while the Top Trader policy itself, has enabled us to move forward and increase our turnover with confidence, without being exposed by customer debts."

- Ian McEwan, Finance Director, Morris Furniture & Co