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Protecting Your Biggest and Most Important Accounts from All Contingencies

In a volatile retail environment that often includes a significant reliance on a few large, important accounts, consumer electronic product vendors can protect themselves from looming problems. Forgoing crisis management in favor of preemptive action and sound financial planning is now possible – with the proper financial tools. The right kind of credit protection tops that list of tools.

All consumer technology companies are familiar with three common troublesome retail customer situations: chronically slow payers; the financially troubled; and those that represent a disproportionate share of the company’s sales. That latter case can be the most challenging, but there are now financial tools available to manage those kinds of customers.

Take for example a still-expanding 15-year-old distributor of smartphone and tablet accessories with $150 million in annual revenue. One of the distributor’s top customers is a large, well-known national brick-and-mortar specialty retailer that represents a double-digit percentage of its revenue. Suddenly, the retailer begins suffering unexpected financial problems.

Solving a No-Win Situation

Previously problem-free but suddenly suspect large national accounts are usually troublesome to consumer technology companies. In this example, the distributor would most likely be faced with a no-win choice: continue to fill orders from the retailer and risk a payment collection disaster, or risk a huge loss of business by not filling orders from such an important customer.

The vendor doesn’t want to stop selling to the account even though it knows the retailer is struggling. Instead, the company should look for mitigation tools to make sure that in the event of a catastrophe it doesn’t suffer a multi-million-dollar loss.

Most consumer technology companies recognize this scenario.

“I have seen cases where one major retailer is 80-90 percent of a vendor’s sales. In those instances that level of concentration creates a unique risk,” said Niraj Lal, Business Development Officer, CIT Commercial Services (CIT), which provides a wide range of outsourced receivables management services that may include credit protection on any of the thousands of retailers it covers.


Consumer technology companies facing these high credit risk dilemmas may initially turn to credit insurance. However, credit insurance generally covers only 80-90 percent of potential liability, and there may be additional costs like deductibles and copays. Also, these companies generally take several months to pay out on their claims.

The Benefits of Credit Protection

CIT’s credit protection program generally covers 100% of undisputed credit-approved invoices (less a small commission) if the retailer does not have the financial ability to pay. The solution is flexible in that CIT’s small commissions are only based on the actual accounts receivables protected, not on the anticipated sales coverage needed. Also, CIT will generally pay faster – usually between 90 and 120 days of a defaulted account’s due date.

“We’re not an insurance company. We underwrite the retailers we credit protect,” explained Lal. “As a result, we’re typically close to the retailers’ credit issues, especially if it’s a difficult situation.”

“CIT’s credit protection service can allow a vendor to maintain an aggressive sales culture while also protecting it from a large loss,” said Lal. “The vendor can sleep better at night knowing the accounts it is concerned about are protected by CIT.”

For more information on consumer electronics industry operational finance best practices visit the CE Financial Strategies Center.

Niraj Lal is a business development officer at CIT Commercial Services specializing in factoring and asset-based lending solutions for consumer product companies including consumer electronics, housewares, and apparel.