In the UK, more than 80% of business-to-business transactions take place using credit terms agreed between the two parties. As enabling as this way of performing business transactions is, protecting your company against debtors and managing cash flow can sometimes be placed under unnecessary pressure from slow or late paying customers.
Credit insurance protects your company against the failure of a customer to pay debts owed to you which may arise as the result of a business becoming insolvent or failing to pay you within your agreed terms and conditions.
How It Works
Using financial performance tools, a ‘grade’ is given to each of your customers that reflects the health of their activity and the way they conduct their business.
Based on the risk assessment, they are granted a specific credit limit up to which you (as the insured company) can trade against and be able to claim should anything go wrong.
The limit can be revised upward or downward as new information becomes available and in the event that they cannot or will not pay, you will be insured and indemnified up to the limit of your policy.
The Benefits of Credit Insurance
A well planned credit insurance programme allows you to mitigate risk to your business and gives you the freedom to maintain and grow your company with the added benefits of:
- Improved cashflow – trade in a more secure environment
- Focus your sales effort towards secure business growth
- Potentially secure new finance – some banks and finance companies favour businesses with credit insurance in place.
- Avoid risk and reduce the probability of bad debt
- Tighten your credit management discipline
- Peace of mind through simply transferring your risk
If you trade with other businesses and would like to find out more about credit insurance and how it could help you, why not contact us today?