 Okay, let's get started. Good morning. My name is John Taylorson. Thank you very much for joining us this morning on this webinar about trade credits. I'll introduce everybody very briefly, but they'll talk about themselves in a moment more. We have Hugh Thomas from Puffin Produce who's chairing and facilitating this today. He'll be doing the proper professional introduction in a moment. We have Sean Purrington from Avenue Insurance. We have Phil Mills from Old Mill Accountants and Financial Services. And we have Alan Thomas, the regional manager for Development Bank Wales. Hugh, why are we all here? Yeah, thank you, John. Just an introduction to start with, I'm Hugh Thomas, the manager director of Puffin Produce. It's my kind of day job. My other role is that I'm on the Food and Drink Wales Industry Board. We've been working with the industry in Wales and acting as a bridge to the Welsh Government for the last four or five years. And one of the work streams that we've developed that we feel is of help to the industry in Wales is a kind of financial work stream that we feel that the Welsh Government can have a role in improving the skills within the sector. And out of that work, the Welsh Government commissioned a block of activity that is being delivered by Dick, Sir House and John Taylorson, and then the grant delivering this work on behalf of the Welsh Government. And that is the Investor Ready program, which helps businesses improve their financial skills. So this seminar is part of that kind of block of work and that block of assistance. So I hope that gives you a bit of context in how we all, how we arrive here today. You know, and I'm no expert in trade finance, so I'll come to the rest of the panel on that. But, you know, welcome to everybody and I hope you sir, good meeting. William, thank you Hugh. Great, so trade credit insurance. Since the middle of March and the massive changes in our trading environment, food and drink producers, processors and marketeers had to deal with a very different world. For many, it has been great news where the likes of delivered grocers, online retailers and food takeaway businesses have gained new business. Many others, it's been quite a different story. No hospitality means that hospitality, be they pubs, hotels, restaurants, sector, stopped overnight. Brewers who focused on the on-trade either stopped or had to switch and try and retail with various levels of success. But the same applied for countless other categories of meat, fish, cheese and dairy and delivered food, van sales or struggling. Some of the companies in this supply chain have managed to recover some revenue by switching their business to more retail consumer orientated stuff. Whilst others decided to furlough and get ready to come back. In either case, coming back to food service and hospitality is going to be very different. Trade credit insurance is a key element for many companies operating in this area. Either because the companies have decided themselves to supply customers needs to be insured or because they use invoice finance and that too relies on insurance cover being available. Why would trade credit insurance be a problem? Well, the first rule I was applied to insurance is generally, if you can afford it, you probably don't need it. If you need it, you probably can't afford it. And with companies like Outradius and others just withdrawing cover overnight for the hospitality sector, this has put a lot of companies in a difficult position. But too many companies, perhaps think like me and think insurance is only in value. If you can claim on it, yet the reality is that insurance claims should be a last resort. If anything ever did go wrong to the extent you needed to make a claim, it's because it's a showstopper. Also, is it worth a thought that if insurance premiums are so high for an activity, is it still a good idea for the reward that's gonna come from that activity or is the risk premium worth the risk? So today we're gonna try and talk about, first of all, what trade credit insurance is and who's it for and why is it important? And also then what the alternatives might be. And it's not just about what we might be supplying and whether or not it's got trade trade cover, but what we can also do as food and drink companies to ensure that there's good cover on us. So without further ado, Sean, can I kick off with you with perhaps a better explanation of what trade credit insurance is? Well, that's not a bad start, John, at all. That's very good. So my name's Sean Purrington. I'm the managing director of Avenue. We're a credit insurance broker. That's all we do. We place credit insurance policies. The market, as John quite rightly points out, is very distressed right now. And it's certainly worth exploring what credit insurance is and what's driving credit insurer behavior right now. So some of the people on the call may already have a credit insurance policy that's relatively popular. They're not compulsory like some insurances. They're very discretionary. And essentially what a credit insurance policy does is it protects you from a loss where you've extended goods, supplied services on a basis of trade credit. So that could be insolvency or it could be just a protracted default situation where your customer can pay you in theory but just won't pay you. So the idea behind this is that the insurance policy is there as a facility that can cover a truly unexpected loss. So the surprise loss, the names that we hear about that go bust on a regular basis, certainly in retail if you look at companies like Cath Kitts and Laura Ashley, these are the businesses that have been struggling for some time and are no great surprise when they do fail. The benefit of the credit insurance policy is the loss that happens if no one saw coming. So in some ways what you can see the insurance companies as, and there are around about 15 insurers that operate in this space. They're bookmakers, they're taking bets. They're saying in turn for your wager which is the premium that you pay under the policy, I bet that that company isn't essentially going to go bust or fail. And the insurer is calculating the odds accordingly. I think what's happening now is that because of the outlook for all sectors, not just the food and drink and hospitality sector, insurance cover is much more difficult to get. It's not impossible. You just have to work harder to get where you need to be. So one of the things where we use trade credit insurance in the past has been to smooth cash flows and sort of make business possible that otherwise would have been either high risk or difficult to finance. How much would you ordinarily expect to pay and what do you think the cost of this is going to be in the future? Yeah, we get asked that question a lot, John. How much does credit insurance cost? And it does vary on a number of different factors. The first is your turnover because that is clearly the amount of turnover you're supplying or generating on credit terms is going to drive the pricing because that's where the risk is. So if you would ask me to give you an average price, and of course there's no such thing as an average price in reality, but the average price would be something like, I don't know, 0.2% of turnover. So if you're turning over 10 million pounds, 0.2% of that is about 20,000 pounds. Does that give you cover on all your customers? You would normally get a policy that would ask you to apply for a credit limit on the customers that you require cover on. And I think that's the nub of the issue, isn't it? It's as a credit insurance policy holder, if I apply for a credit limit on a particular buyer in your sector, will I get cover? So just to expand that point, our sister company is Mitchels and Butler's. So we were recently asked by Mitchels and Butler's to front up to the credit insurance markets and just make sure that the insurers were still offering cover on supplies into M&P. And of course they were, but not as much as they were giving three months ago. So they didn't withdraw it, they just reduced it back? Yes, yes. I should say to everybody, it was rather a miss of me. Everybody who's on this call can participate by using the Q and Q and question and answer function on Zoom and we'll try and capture those points as we go along. Just coming back to you, Sean, for a second, that business about working capital and reducing the headspace that you have on trade credit insurance, what do you normally find your companies do if it's reduced or withdrawn altogether? So because the market is to the risk market, the risk environment is changed so dramatically, insurers are underwriting differently and what they're looking for now. So previously they would have looked and factored in in a substantial way, public domain financials. And the problem at the moment is that they're just too old. They just don't represent the current trading position. So if you file 31, 12, 18 as your last filing, they're almost 18 months out of date and they're only gonna age. So what we're doing at the moment with our customers and we have a number of customers in the food and drink sector, everything from fruit and veg wholesale through to gourmet food companies, to poultry farms, we're actually helping them get up-to-date financials on their customer. So is that using management accounts to support their trade credit position? Absolutely. The insurers are looking at up-to-date financials. They're looking at liquidity in the business. They're looking at forward plans, confirmed orders and just making sure that the exposure that they're running is a reflection of what the customer needs because as you can imagine, there are a number of companies that are holding big credit lines on organizations and entities that they don't really need. So it's about dialogue. It's about dialogue. And what do companies themselves, what sort of things should they be putting in place if, for example, they don't have trade credit insurance at the moment, but they maybe should think about how do we cover this risk? And from your point of view, what would they need to get in order before they came to you to get trade cover? Yeah, so if you haven't got trade credit insurance, the next best thing really is an information report, isn't it, from a status agency and credit-safe experience done in Brass Street, others are available. It's the next best thing. Some of our customers will also have in the past moved from essentially bad debt provisioning, so setting aside some of their sales every month, every quarter to cover the risk of a loss. They've moved on from that and taken that insurance instead. So there are a number of other mitigants, but insurance is really going to give you that cast-iron guarantee that if all goes horribly wrong, you are going to get paid and most of your loss is going to get made up, so. And of course, the other way round is, is that you want your suppliers to be able to supply you. So if they need trade credit insurance, what can you do as a food and drink company to make sure that you're insurable? Yeah, so this is a really interesting point and we're doing a lot of work in this space right now. So we're helping our customers get their credit rating back on an even keel with the insurers. And it's the same principle, as you know, it's the insurers will want up-to-date financials so I want to know your liquidity position moving forward. I want to know a bit more about your banking facilities, your outlook, your strategy. Are you, as you were saying earlier, moving into new product lines or new services? So, you know, is that going to be a factor in your in the balance sheet moving forward? And then fundamentally, it's just working out who to speak to at the insurance company to make sure you get a fair, you know, a fair hearing. And like any good accountant will tell you, it's about how you communicate the messages behind the numbers too. Yeah, OK. So turning to Alan, I mean, one of the key issues here then with trade credit insurance is this, if you haven't got it, the other alternatives are to make sure that you've got enough working capital in the system so that you can extend that credit facility. What's the attitude at the moment with all these bounce back symbols and the others? I mean, if somebody turns up on your doorstep at the moment, Alan, expecting more working capital, what's the response going to be? Well, good morning, everybody. Without stating the obvious with the amount of liquidity that's in the system at the moment, it will be debt liquidity. We'd be very surprised if somebody come very early looking for cash flow finance at this moment in time. It's one of the hardest lens. It's one of the most difficult ones to highest risk. And the first question would be, well, why haven't you taken advantage of what's in the marketplace and got money from Sibyl's Pibles bounce back or whatever was available? And there was a lot available, there still is. And I know a lot of companies have taken that money and it's sitting on deposit and that's not wrong. That's they are preparing to bounce back and keep their employees and get back into trade. If you haven't done that, then that's the first obvious question. Why didn't you do that? And if you like, there's a question mark over management. If you haven't done that, if there's a plausible story, why you didn't do that and why the cash flow need is now because bigger contracts come in different terms, then it's a little bit like Sean was saying, you've got to prepare. So you've got to come in with your figures up to date, with the figures on the people you're supplying and the contracts you're taking, so that we've got a credible plausible story to believe how the money is going to be repaid and what term it's going to be repaid in. And also, I guess, if you come in showing everything's insured, so there is no chance of bad debts. I mean, let's go down firstly, you've got to come in showing that the sales are definite. They go into happen, they got profit on them and you've got your supplies to do them. The terms are reasonable and you will be paid, but then if you're not going to be paid, then insurance wouldn't do any harm. We are expecting really cash flow funding to be more of a requirement. Not this winter really, probably next year, next March, next April, next May, when all those direct habits starting start hitting of all the loans that have been taken. That's going to be a challenge, let's be honest, because if the marketplace is really strong, then we probably can help. If the marketplace isn't strong, then cash isn't going to be highly available. We already see the high street now, drawing back high street banks for liquidity because they're looking at what bad debts they're going to have on their balance sheets coming forward. So you've got to prepare, you've got to have a plausible story and have it all you were figures up to date and answer all the questions before you come in. If you're going underprepared, then actually you can set hairs running and get the wrong answers. So the message there is that coming to you too soon without doing the preparation may actually spoil your chances of getting the support if you actually need it. Yes, that's right, I mean, you can come back cause you can again and again and in a development bank we will always talk to you. But if you come in sort of half cocked and you haven't got all the information, then actually puts a big question mark over your ability as a management team or the way you've thought it through. There will be some companies out there Alan that don't know that they've got bad debt yet. The businesses that were furloughed and there was a bit of trade credit sort of left not sorted out. What's your attitude or what's your feeling about how much trouble is yet to come out of the woodwork for the guys that you're dealing with? That's quite a difficult one. As you said, some sectors have done it's some parts of food and drink have done really well. It's been really good for them. Other parts, it's gone into a kind of dormant state and it's going to come back out. Now, there will be a lot of debtors parked and agreed and it's a two way street cause you'll have agreed with you or credit does, you know, look, we'll have to pay these when we get back or we pay a bit on the pound and we get going. There is going to be some pain, isn't there? You can just concede that there's going to be pain. However, you know, it's all about communication there that you have communicated with your customers, your customers are communicating with you so that if you have a particularly big exposure to somebody that we feel has got problems, you can come back and say, yes, but look, I've got their up to date management accounts, I've got their cash flows and actually I know their bank facilities are being supported, so we believe you're going to be paid. Also, I guess you've got to write in a reasonable amount of bad debt into your forward forecasting because if you're going to put everything's going to be hanky-dory and 100% paid, then we'll probably just par it back and then if it doesn't make sense, then you don't get the facility, I guess. So in a way you're doing what Shaun is doing is that you're assessing some of the risk in there as well and it should really be, as we call it, management by no surprises. Yes, that's a fair way to put it. I mean, forecasting is difficult in this circumstance. That is one of the most difficult things and when it's something we're challenged on, when we see a set of forecasts, what's this based on? We need you to substantiate your forecast by saying, this is based on, this customer have said they want this level of supplies, this one's this one and also we've gone all our way up and got our figures but then we've parred them back because we think it won't quite come to that. And anything you can do to put behind that as evidence of why those sales have come in and the timings of them just makes them more credible and makes you first in the queue to hopefully get the facility you're after. Brilliant. Thanks, Alan. Before I come to Phil, we've had some questions come in. We've got, well, two really ones about really is just a sophisticated form of brokering but also what does the credit insurance cover? Is it all risk or selected specific risks? Shaun, do you want to just pick up on those sort of that issue about what are you getting cover for and that point about it being individual companies that you might find that you are out of your portfolio of customers that you can't get cover on all of them? Yeah, so the risk that's firstly the easier one, the risks that covered are essentially your invoices. Your invoices, there has to be an invoice for the dispatches that you've made and it has to be within the terms of the policy so the credit terms will be specified and the policy, et cetera, et cetera. So there's no performance risk. It's just the invoices that are covered under the policy. So if the goods go missing or if there's something that happens in the supply chain further back in that chain, there's no cover. It's just the invoices that are covered. Can you cover specific risks? Yes, you can. You can look at your ledger and you can say, actually, maybe I just want to cover this particular customer or these five or these 10 or everything above 50,000 pounds. It can be done. So if you get a big customer, a big new customer, and I'll remind everybody of the old ledgers I was taught many years ago by a rather hardened cheese maker that said there's no such thing as a new customer. There's just somebody else's bad debt about this. But if you do get that new surprise wonder customer, you can go and get some insurance cover on that if you feel you need it. You can, you can. I mean, if you come to me and say, I've got a 10 million pound order now to supply Virgin Atlantic, you're not going to get it. It's still down to the quality and the underlying quality of the credit risk and it will be more expensive because the insurer is naturally going to charge a little bit more just to focus on one risk. They do like to see a whole portfolio, but it can be done. It's certainly going to be done again. Okay. I mean, not to do you out of a job, Sean, but turning to Phil, there's more than one way of managing these sort of risks, isn't there, Phil? And particularly from primary producers, and you deal with a lot of those guys, pooling risk, you know, I'm thinking of co-ops, farm groups and the like. They can access markets collectively that they couldn't perhaps handle the risk on individually. Yeah, I think that's right, John. I think there's a few things that I'd sort of point to for the businesses out there that are kind of struggling or scratching their heads on some of these bits. Insurance can play a really important role, but actually we've been talking about no surprises and we talked about communication. Well, getting to know your supply chain a bit better. One of the things that we've seen, which has been really impressive actually in a way, as a result of the crisis that we've faced, is that actually conversations that weren't happening that should have been happening in the supply chain have started to kind of take off. And you've got, you almost had two categories of clients, those that were gonna go and bury their head in the sand and hope for the best. And those that were on the phone to all of their supply chain backwards and forwards and saying, look, how are things? What have you got lined up? Have we got stuff coming in? Are you okay? Where is that at? Okay, we're gonna get that shipment. Right, now it's gone out the door. How are you gonna pay? Where are you at? Have you taken a civil loan? And so I don't disagree that trying to get hold of your Equifax, your Dunham Bradstreet, your reports to get information on your supply chain is important, but actually let's not forget that we've got ready access to the supply chain because we're working with them all day, every day. I had you point that Alan raised about some of that credit history being historical and we were in a very fast-moving situation. What would you advise people to do to be aware of the current risk? Yeah, I think that's really interesting. And as an accountant, it wouldn't surprise you to learn that I want people to have up-to-date financial information that they can use to run their business every day. And not everybody has that, which is a source of frustration, as you might imagine. And the truth is, you probably have worked out now that you need to have that. I think you've then got to try and have that conversation, as I said. And some of you, you've got to take it with a pinch of salt, okay, because you're perhaps talking directly to whoever it is and seeking to understand how they're going as a business. But I think there is a greater degree of collaboration than we've seen in the past, a greater willingness to share information about what's going on and asking some of those challenging questions is absolutely what's been expected. And you would expect that the businesses you were working with have answers. Because actually, I'm very firm in the belief that the food industry has got to emerge out of this as a collective and gearing up as a collective, restocking as a collective. It's going to be something that we're going to have to kind of take carefully with. I'd also encourage people to be thinking about managing their credit exposure. I've got clients that would look at a discount for payment upon delivery. So they're cutting that need out immediately and they're shortening their working capital cycle immediately. You've got notoriously businesses that I work with are poor at imposing credit limits on the people that they work with. So rather than relying on the insurance to catch it, actually have you assessed what you're comfortable in giving? But Phil, most food and drink producers and the speakers formally won myself. It was a bit of a vulgar subject mentioning the money. I mean, it's all about the food and its loveliness and it's rather vulgar to talk about the price and how soon do you think you might pay? And hence why I'm not going to admit to how many thousands of dollars I was certainly down on the game because we thought we had a lovely customer and they turned out to be less than lovely. Now, yes, the point was made about you can make a provision for bad debt, but that's a provision that's still coming out of your pocket. Should I have gone open book or something as a way of ensuring that there was a closer relationship and that price and terms were discussed earlier? Yeah, that's a real challenge, John. And as you know, there are not a lot of contracts out there for a lot of the business that's written in food and drink that, you know, because people don't get down to the kind of formality because it is all about the story of your lovely product. I don't have an easy answer to that. I think that there is an opportunity with what has happened for a greater transparency and actually some just open conversations about what we're doing in business with one another. And so I do think there's been a shift in what people are willing to kind of talk about and to open up about. And actually for some people, it's probably about taking that leap from saying, I am the owner of this brilliant food brand that has got this provenance to I am in business. Yeah, give us your money. And I've got to make this work for me. But by the way, I've got this fantastic food brand that's got this provenance behind it. And I want to kind of promote that. So I think that, you know, let's not be naive. You can't sell your fantastic food brand if you've got no cash. And some of those tough conversations, I think, have got to happen. But we've seen, particularly with retailers and with online, people paying much quicker. I mean, the great thing about online is it's money up front is, I don't know if that's insurable, Sean, when you do sell online, particularly with some of the new, I won't name names, it's some of the more interesting online retailers who act as aggregators of demand and your money is not usually up for more than seven or 14 days, but your money is out. Yeah, that's insurable, that's covered. Obviously cash sales aren't, there's no need. But yeah, online sales aggregators, online merchants, of course, yeah. Because you can, there's some people who've been borrowing against that as well. I don't know, Alan, what the attitude of the bank is, but I presume that you want to see more different channels in future to market rather than people wandering up with a big retailer and that being the bulk of their business. It's probably always been the case spread in your risk, which is easier said than done, because obviously most businesses have some key contracts, and we kind of understand that. But yes, if you can spread your risk, if you can spread your payment terms, if for new clients you can get, look, yes, we're willing to supply you, but it's gonna have to be performer initially for so long to try to get some knowledge of them, understand how they work. And if when they're paying performer, actually performer already turns out to be 10 days and then we get to 20, then actually you do have to think, well, how much am I gonna commit to these people? How much of a bad debt am I willing to take? Or am I willing to go and borrow against this? So it's my debt then. It's my debt in my name and possibly some personal liability. So it's kind of those eye-opening understanding what you're getting into. But yeah, if you can spread your risk, it's great, but it is difficult. We kind of understand that and a lot of businesses have some big key contracts and they've had them for years. But then you do need to get very close to those customers to understand them, to really listen to everything that's going on. At the moment, as I said earlier, they should be liquid. There shouldn't be any reason for them not to be paying you. I think it's further down the line that the liquidity may become a problem. But if they're negotiating really hard for longer terms at the moment, you've got to either cover yourself through insurance or something or you've got to ask a question. Why are they doing that at this point? And sometimes it's really hard to turn business out because that's turning your own turnover off, if you like. But it's better than getting the bad debt that could be very critical to your business. Shaun, I was talking to a landlord of a pub, I know, strangely, this week who has just started back and has got 30% of the volume that he would otherwise have had and he doesn't get trade credit terms at the moment. Now, if he'd had trade credit terms previously, you'd have expected that insurance to go back in place, but it's not going back in place at the moment. There's talk of a government scheme to try and do something about that at the moment. Well, this is the big news story. This is the White Knight. About a month ago, the government announced that they were going to provide what we call some reinsurance support to the mainline insurers. So the value of about 10 billion, it's 10 billion of support. So it's a behind-the-scenes arrangement between the insurers and the government. No extra cost to the policyholder, to the insured, and the way it works essentially is that the government has said to the insurers, you must come back on cover where you've previously withdrawn cover due to COVID-19 related issues. So certainly in the food and drink sector, hospitality would be an industry or a sub-sector that would certainly benefit, for example, from the government scheme. What's the catch? Well, the catch is that you have to reapply for the credit limit that you require. So it's not automatically reinstated. You have to go back to the insurer and say, I now need cover, and here are my confirmed orders moving forward. But it's great news. It was announced a month ago. It was sent to the European Commission for rubber stamping. Rubber stamping. A month later, we're still waiting, but I was told yesterday that finalisation will be in a couple of days. So you heard it here first. So what will that mean? That'll mean that where you did have trade credit cover, you should be able to get it reinstated. Reinstated, yeah. It doesn't make a bad risk, a good risk. So what the government is saying to the insurers, if you were going to pull cover anyway, because of the financials, because you'd had overdues reported on that particular customer and the outlook was serious and severe, that you cannot come back on cover. It has to be COVID-19-related. So that there's an element of interpretation there, because as we know, hospitality sector's been difficult in any case. Yeah, but there's clearly been a number of what I would call mass exercises where great swathes of cover has been removed on a sub-sector and that's unacceptable to government and that's going to be one of the focus points. I think that's where it's got bogged down with the European Commission is the interpretation. What do you mean by COVID-19 related? But importantly, you have to have a credit insurance policy to qualify. So if you're already a user, you can access the scheme. Just on that point then, where companies have had a policy, their board has said, we will only sell or supply people who we can get trade cover on and that trade cover is effectively removed because you can't get insurance. What's it, you know, will this make any difference to that and what are their alternatives? Is there a higher premium for more risk? I think at the moment, it's back to the bookmaker point, you know, I think all bets are off and there are just some risks that are just too great for only insurer to bear. But this scheme should enable the insurers to come back on risk and it's backdated until the 1st of April, by the way. So if you had a limit board after the 1st of April, it could potentially be reinstated and it runs until the end of the year and there's a review point in September and the government will then decide whether to roll it forward for another few months depending on where we are with the economic environment. So it's not a magic wand because there are conditions attaching, but cover's available, there's no extra cost. It has to be good news. Okay, and before I come to Phil about the pricing of credit into individual customers or products, the fact that the hospitality is coming back, Sean, this all, now, and obviously this autumn and the run-up to Christmas, if they come back and they're not the same company that they were before, if they've, you know, a couple of pubs have been bought up by another and they're in a different company, so it's a newer company. How are you gonna get trade cover on those guys? Well, that feels to me like a new application. So that's about presenting, you know, as Alan was saying, presenting the numbers, the detail to the insurer with a view to getting cover. So if there have been changes to the business, if they restructured, if they've got new owners, private equity, it's a reset and I think you would go again and say... And the new co is more likely to be difficult to get cover on than an established business. Yeah, I mean, what you need to watch out for and maybe Phil has a view on this is pre-packed situations, you know, where organisations have gone bust under a pre-packed situation, dumped their suppliers and started again and hoping everything is going well. We've had some famous ones of those in the food and drink. Yeah, I'm aware of that. I've experienced one myself a few years ago, with a wits out of Chelsea, literally overnight, pre-packed and back up and running, but they hadn't paid the previous suppliers their bills and they were flogging their stuff. So that's, you know, are we going to... Well, that's a question for Phil, really. Are we going to see more of that or less of that, Phil? More insolvency. Yeah, and pre-packs and people coming, springing back as the new improved version. Yes, simply. Could you just let us know which ones in the food and drink sector, so we know... Yeah, and look, it was already a... It's already been an industry with pretty fine margins, is what I would say. And, you know, if you go and erode a whole market place, you shut something down for three, six, nine months. Then there is only one possible outcome. And the government, with the support, which, you know, by the way, I think, in terms of speed of delivery, has been impressive thus far, has taken the bet that they will support enough businesses that they will be able to soften the scarring in the Bank of England's words and allow enough business to continue such that they can mop up some of the kind of casualties, truthfully, and that's the pretty tough reality. You did mention a point on pricing, and pricing your bad debt into what was going on. I was sort of thinking about it, and the truth is you need, as any business, to understand the price that you are going to sell at and what that is going to deliver. I've been thinking about this quite a lot recently, and it's bloody difficult, and forgive the language, but I'm an accountant sat here scratching my head because I look at spreadsheets all of the time, and trying to work through with businesses. But when you factor in what my bad debt look like, what do I understand about the new furlough scheme, and how that's being phased out, and therefore what my employees might cost me, and therefore what is my cost of production? What, if anything, is a VAT change going to do for me in terms of possible demand down the chain, or am I in a hospitality myself, and do I understand what's going to happen in terms of the kind of VAT position? Do I understand my cash flow position to make up my VAT bill next year that's been deferred? Have I remembered that I've got VAT coming back in to charge this quarter? Am I subsidising my whole business model with a grant that I've been given, or a bounce back loan that I've been given? That's a really good point, though, because surely a lot of characteristics of a food and drink business is that it's cyclical, but we often have a lead up to Christmas, hence why we have so many insolvences in February, and they crystallise out then. The only problem is that, as Alan was asking us to do earlier, you've got to try and forecast for what the cycle is going to be and whether it's the same cycle as we had last year, and therefore how much working capital we're going to need, so we don't know how many customers we're going to have or when they're going to rock up. Yeah, and the best advice that I've got is that you've got to understand two things. You've got to understand your profit and loss and your cash flow. You can't do one. You've got to do both. You've got to have a best crack and you've got to re-look at it every week, every month to understand what you think it is starting to look like, and that is a tiresome exercise, and there are some tools out there that will help you, but you've got to do that. Tiresome exercise? This doesn't sound like an accountant. I mean, I relish the opportunity to... I was going to say... Very good. Yeah, I mean, obviously, I've been known to be a bit of a spreadsheet monkey myself, but I mean, it does come back to this business about forecasting and before you even go near a bank or an insurer at the moment, it sounds very much as if forecasting and being able to articulate what your business needs are and how you're managing them and how you're pricing in either the upcoming costs of unfurlowing staff or the cost of potential bad debt and or how you're going to manage that risk, which is handy because next Tuesday at 8 o'clock in the morning, we're having another one of these sessions where we're going to be talking about forecasting and managing and mitigating for financial risk. Why would you want to miss that? But anyway, that's the plug for next week. I think actually, I mean, we should really ask everybody, in fact, Andy Richardson has asked me to ask you all. With you had access to the government today, what would be on your wish list for things that they could do to actually make a big difference in the food and drink sector and trade credit availability today? Sean, would you like to kick off with that one? Well, we haven't mentioned the B word and Brexit, I guess, needs to be resolved. It seems to be, you know, taking secondary... I don't think we've got time for that one today, Sean. No, but I think making a resolution on Brexit for the food and drink sector and making sure that... The certainty or the uncertainty that it's providing. Yeah, a decision and a resolution, I suppose. So from an insurer's point of view, is that uncertainty about Brexit and whether or not you're trading outside of the sterling zone? Yeah. Does that make a difference to your insurability? Yeah, it does. I mean, remember, the market was distressed before COVID. There were some serious risks on the horizon and insolvencies were arising. So it's not all about just COVID. It is about other issues like Brexit too. Yeah, yeah. And we've got winter coming and Christmas and chilled storage space at a premium, et cetera, et cetera. Alan, what would you... You've got access to the government. What would you ask them to do for us all at the moment, please? The Welsh government or UK government? Well, firstly, I echo what I think Phil said, that they have reacted quickly. They have helped. It's been phenomenal actually, the amount of liquidity they've put in. I think possibly now they need to start listening to specific food areas and specific people like yourselves, possibly, to say what is the specific areas of support that's needed, because it's been blanket up until now. Everybody can have X. Everybody can furlough. The other business is, they cannot operate with the two metre or the metre distancing. It just doesn't make any sense. They've got to stay closed. And it's now become more specific to different areas of how we can support those. Blanket, I think, is finished, because the trouble with that is is people actually taking support that don't need it. And I think it needs now to be more specific to certain areas that actually because of the criteria or where we are at the moment, they can't trade or if they can't trade, they just lose more money. So it's about looking at specific areas and getting some expertise in to say, look, this is where you need to channel your money now. So it becomes sort of more detailed, more granular down to certain areas rather than blanket now. And with that, and the sort of mopping up of those problems, it does beg the question if we're going to see more mergers and acquisitions. Are you in the, do you think they'll be funding where two wrongs particularly could make a right if they can get economies of scope and scale in place? Well, I don't know if funding is what will be needed because what I think if that's going to happen in some of the larger businesses have now war chests, even if those war chests are debt war chests but very reasonably cheap debt, they can use those to come together. They would make sense to a certain extent. And if you can understand the philosophy, why it's going to make sense, then yeah, we would look at those opportunities because yeah, there could be some good opportunities out there, but it would be good actually. Sorry to say the same thing. If they come together, obviously it's going to be well planned, but also that they're putting their own money on the table as well as trying to get debt into it. And a more targeted response from the government for those cases that start to emerge is finding it difficult to trade on in the current circumstance. Yeah, yes, indeed. Hugh, you've been sat listening and taking notes, I noticed. What's your thoughts and what would you have us all do as a result of today and what you've heard? Yeah, I suppose my message to the government is that, as we're speaking personally from a public perspective, a lot of companies that supply the large retailers have done well through this crisis. I think it's, you know, we've got to do whatever we can to help the businesses that are struggling, but there are some businesses that were pressed week before this, so it's going to return on. Plus that does then create gaps in the market, opportunities for other businesses. So one of the things I would say to the government is make sure you keep supporting the sector to grow and develop as well, even though the support services that were in place before the crisis, make sure that the same energy in those services as well. But you've spoken in the past about the need for financial literacy and for businesses to take more interest in their finance, and I think the message from Sean, Phil and Alan have all been, if you want to come and make a case to us, you've got to be coherent. What can be done about that, Hugh? You know, that's what the public business is built on. We've got a, what we call a predictive model that runs a kind of year ahead and we do weekly property losses. Everything is absolutely reconciled with the penny. We can probably predict our profit for the next 12 months within 5% and our cash flow from that as well. We're lucky that we sell relatively reliable blocks of potatoes to the big retailers so we can forecast pretty easily. But that gives us absolutely, a finite financial control and that allows us to drive efficiency, controller, capex, all the things that we need to do. It's a kind of, those businesses that are starting off, I can't under-emphasise how important that is in this business. It's almost been a lesson to me in the last 8 to 9 years that we've got better in that and how much control that gives you and what confidence it gives the banks if you want to borrow from a new project and these other things. When you're delivering financial numbers to a bank every month, they're exactly what you said they were going to be. That gives confidence and that allows you to grow and build partnerships. Do you think the government or agencies give us enough information about the marketplace at the moment and coming back to Sean's point about being able to go and check on companies and ensure that you know what the risks are that you're taking. Is there anything that can be done in that area at all? I think that's a different one isn't it because everybody knows their own sectors. As soon as the government tries to get into understanding it's very difficult for them to do that isn't it? Companies working in sector know the players, they know the kind of environment that those guys are working within. There is a responsibility for businesses as well to understand where they are. I think that's coming through from the three other panelists today is understanding your supply chain if you don't mean talking and communication. I think it's one of the keys to it. Brilliant, thanks Hugh. So guys, any final points you want to make in terms of the top tip that we would send everybody away with? Sean, top tip? Well it has to be if you're not currently a user of credit insurance take a fresh look. Phil, top tip? Take your last year's accounts make sure you actually understood those and try and work out from there all those pages at the back that you never read which you've got a lot of information in what does that look like next month, the month after and for the next year? That ability to understand your business in the direction of travel. Because entrepreneurs don't want to do it they want to run the business because that's the exciting bit and we get that. Darling we're artists, it's so vulgar talking about people. Alan, Alan! Top tip before us please? I guess it's to say be prepared but also be honest and don't be worried about coming to have a conversation with your bank manager with a bank advisor, with your accountant be honest and understand where your marketplace lies where you think it's going and if you need to borrow make a good case for that but do think of it from the other side think what's going to make that guy think earlier the other side this is what I want to support this is what I want to get behind so try to think of it from both sides and not sort of just oh yeah I've got this opportunity everything's going to be wonderful you've got to put it in the context of where the marketplace is at this moment in place moment in time and we are still lending by the way I know I can over a bit there whether we are still lending. No that's brilliant that's great gentlemen I think all of you I have to say this morning it's been personally I think it's been great we've got some real insights appreciate the questions that we've had from the other side of the panel just remind everybody that next Tuesday at eight o'clock we're doing our managing forecasting and managing or mitigating financial risk seminar so hopefully we can get lots of people signed up for that one and lots of great questions thank you Hugh for the food board for instigating this I hope everybody has a lovely day once again thank you all very much indeed for your time and attention Thank you all Thank you