There are risks involved in providing credit terms to your customers.

Have you thought about what would happen if your customer defaults, enters administration/liquidation or simply closes its doors?  Oftentimes, many businesses are shocked when they receive a letter from a liquidator advising one of their customers has become insolvent and their outstanding receivables will not be paid.  These losses could be potentially devastating for your business.

Please feel free to use this simple tool to help you understand the impact of a single unpaid invoice would have on your turnover by clicking here.

Trade Credit Insurance can be used as an effective financial management tool that can:

• Protect and improve “cash-flow”,
• Enhance balance sheet and reduce the cost of finance,
• Increase sales and profitability,
• Improve and strengthen credit control and management procedures.

Offering goods and services to customers on credit can leave businesses in a vulnerable position if one or more of them don’t pay. Although businesses may be able to manage some of the smaller bad debts that come along the way, large unexpected losses could be potentially devastating for businesses.

Therefore, if you own any type of business or are a subcontractor offering credit terms and rely on customers meeting their payments, then consider arranging Trade Credit Insurance.

Credit Risk Controls

Here is a quick checklist which may assist you protect your business against the risk of bad debts:

• Credit assessments: when establishing a new credit account, ensure you have effective in depth procedures when onboarding new customers. Also include detailed and periodic credit checks and above all, never make assumptions about a customer’s continuing credit worthiness;
• Terms and conditions of sale: make sure you have the right terms of sale that are up-to-date and allow for you to recover your goods or outstanding monies when they become overdue;
• Overdue collections: when an account becomes overdue, make sure you have robust processes in place to initiate collection recoveries;
• Security: make sure you register your security interests over your goods via the Personal Property Securities Act.

Outsourcing these activities is often an affordable and effective option for time poor businesses.