October 2019 There is no denying that keeping good business is challenging. A good business manager needs to try to increase sales and to discipline costs; simultaneously, outlays must be returned in product or service price values. An outlay that is highly undesirable is debt going bad - if your customer becomes formally insolvent, you can expect to say goodbye to your money.
Bad debt hurts, and it’s incredibly costly in terms of both time and money. If your customer is still trading, you have to decide whether to pursue a defaulting debtor, and then to instruct commercial agents, and further then, to monitor the recovery process. This process is costly and the returns are minimal - often, you’re throwing good money after bad.
Trading conditions are uncertain, with nearly 500,000 UK businesses now in significant financial distress*.
Even if your customer has a good credit rating with an agency, there is no protection for you if they go bad. The ongoing solvency of your customer is outside of your control, and a bad debt will impact the lifeline of your business - your cash flow. Your trade debtors can make up to 40% of your total current assets, but often this asset is overlooked in terms of protection. Your business is more likely to suffer a bad debt in comparison to many other risks.
The value of trade credit insurance is that it provides the peace of mind of knowing that your trade is protected. The policy will also give valuable market intelligence on the financial viability of your customers, and, in the case of debtors in foreign countries, on any trading risks specific to those countries. The policy will analyse your customers’ financial status, profitability, liquidity, size, sector, payment behaviour and location, while also obtaining up-to-date information from other suppliers.
As well as providing a tailor-made solution that matches your patterns of business, we can ensure that you are getting the full benefits from your credit insurance policy. To find out more about how we can help you, please contact us here and we will get in touch with you.
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