How should timber dealers manage credit risk?

Credit management is critical for timber dealers because: margins are thin (3–8% net), average order values are high (€5,000–50,000+), and the construction industry has higher insolvency rates than average. Best practices include: credit checks on all new accounts (Dun & Bradstreet, Creditsafe), credit limits set at 1.5× expected monthly spend, 30-day payment terms as standard (60 days for major accounts with good history), credit insurance on accounts over €10,000 (covers 80–90% of bad debt), proactive credit control (statement at month-end, call at day 35, stop supply at day 45), retention of title clauses in terms and conditions, and personal guarantees from directors of small companies.

Credit management is critical for timber dealers because: margins are thin (3–8% net), average order values are high (€5,000–50,000+), and the construction industry has higher insolvency rates than average. Best practices include: credit checks on all new accounts (Dun & Bradstreet, Creditsafe), credit limits set at 1.5× expected monthly spend, 30-day payment terms as standard (60 days for major accounts with good history), credit insurance on accounts over €10,000 (covers 80–90% of bad debt), proactive credit control (statement at month-end, call at day 35, stop supply at day 45), retention of title clauses in terms and conditions, and personal guarantees from directors of small companies. Bad debt provision of 0.5–1.5% of turnover is typical for well-managed timber businesses.

Why this matters

This question relates to Timber Dealer Margins & Distribution: Industry Guide, which covers the broader topic in detail. Understanding this specific aspect helps architects, builders, and timber dealers make informed specification decisions.

For full context and additional technical detail, see our comprehensive guide:

→ Timber Dealer Margins & Distribution: Industry Guide

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About this answer

This answer is part of the PuurModulair Knowledge Base — comprehensive timber specification guidance for architects, builders, and dealers across the UK, EU, and Scandinavia.