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Credit Insurance is becoming increasingly important, through creating the right payment terms with your customers is critical for survival and growth in the market. Without protection, it’s not always within your control to ensure invoices are paid on time even with a contract. Extra measures should be in place to ensure profitability, allowing your business…
Credit Insurance is becoming increasingly important, through creating the right payment terms with your customers is critical for survival and growth in the market. Without protection, it’s not always within your control to ensure invoices are paid on time even with a contract. Extra measures should be in place to ensure profitability, allowing your business to have all its resources to take the next steps.
To reiterate how important of an issue this can be for businesses over 40% of business-to-business (B2B) invoices are unpaid past their due date. This is where credit insurance comes in and saves the day and acts as protection.
Credit insurance provides a security blanket for businesses against non-payment or short-term finances as mentioned above such as invoices from your customers. Insurance kicks in after the due date to support and prevent any problems with cash flow.
This can give your business the confidence to grow and extend credit to new customers to become more competitive. As a part of your risk analysis process, this helps give a more detailed profile of your customers this facilitates an understanding of the market.
With the risk of customer insolvency removed this looks more favourable to your business and can allow you to negotiate more favourable terms with banks and or financial institutions.
To figure out if this is something your business would benefit from, first ask yourself these questions:
This would be beneficial to any business that is exposing themselves to business-to-business credit, Sales of goods or services on account credit terms would massively benefit from credit insurance as it eliminates a huge risk and stress factor.
There is no limit or requirements to who can apply for credit insurance, whether you’re a small or large business there is a plan that will support your business from bad debt.
There are several benefits mentioned above to why businesses should adopt credit insurance, and as a cost-effective method, it appears to only drive a business upward while facing this time-consuming.
Overall, it prevents bad debt and allows you to make competitive business decisions without the risk of insolvency. Here are some real-life impacts of what credit insurance can prevent:
Depending on the policy you choose for your business, the first steps are as simple as passing over information about your business and customers including your top buyers and your loss history this will help establish credit limits and trade credit terms, such as a maximum invoicing period e.g., 30 days and your premium.
If your customer exceeds their agreed invoice contract or more without consultation or communication of an extension you easily notify credit insurance brokers who will step in and collect the debts on your behalf This not only saves time and energy reaching out to everyone in the hope of payment or a response, it allows your business to claim on its insurance and allow things to run smoothly.
No matter on the business or policy it is always subject to adjustments of the credit limits subject to what the credit insurance firm believes is right to provide security and avoid potential losses.
A type of insurance that covers all or substantial parts of a vendor’s sale over a short-term trade credit.
Protection that extends credit to customers that are located within a particular country, can be useful for businesses that have customers at high risk of political or economic instability
This credit extends a range of your customers. This type of policy can benefit businesses that have a diverse customer base or a range with a low-risk default.
This provides cover for businesses that extend credit to a single customer, This can be beneficial if a business has a large exposure to a single customer with a large risk of default
This is completely dependent on the type of coverage you need and how much you’d like to insure your business up to.
For example, SME’s cost might be a alot less compared to a large enterprise due to the mass of customers and revenue coming in on a monthly basis. The premium is calculated as a percentage of the total amount of revenue starting from 0.15%, this can sometimes work out to be much higher.