Say good riddance to bad debt....

Whether you run your business within New Zealand or overseas, there is a constant fear of losses that can be incurred from unpaid invoices.

Trade Credit (aka Accounts Receivable insurance) kicks in when your customers fail to pay their bill either on time or not at all due to insolvency , protracted default , and in today's world circus we can legitimately add political risk to this.   Most policies will cover you up to 95% of the debt owed.  

How it works (in pictures), care of our friends at Coface

                                                                How does credit insurance work? 

 

It's not one size fits all, you have options....

There are four types of trade credit insurance and the cost to you will depend on what option you pick, your industry, the annual revenue that needs to be insured, your history of bad debts, your current internal credit procedures and your customers’ creditworthiness to name but a few.

The four policy types are 

Whole Turnover 

For protection against non-payment of commercial debt from all customers. You can select if this coverage applies to all domestic sales, international sales, or both.

Key Accounts 

With this option, you decide to insure your largest customers whose non-payment would pose the greatest risk to your business.

Single Buyer 

If a major source of sales comes from one customer/client then this option is for you because it insures against potential default from them and only them.

Transactional 

This form of trade credit insurance protects against non-payment on a transaction-by-transaction basis and is right up the alley for companies that have few sales or a key account/customer.

 

It's not just about bad debts, a well run Trade Credit policy will help you  

  • Increase your Market Share 

    • allowing you to offer better terms and raise credit limits that ultimately grow sales and enhance your customer relationship

  • Boost Market Penetration

    • by evaluating credit risks and pre-qualifying new customers 

  • Expand to Foreign Markets if you're after global domination

    • make strategic credit decisions and offer competitive terms overseas, eliminating cash in advance or letters of credit

  • Grow with your key Customers

    • aggressively grow sales with a key customer without the worry of concentration risk

  • Obtain Financing

    • Insured receivables translate into secured collateral which means more working capital at more favourable rates

  • Support future Acquisitions

    • By creating coherent credit processes, taking control of receivables in a safe way, and understanding the credit worthiness of a new customer's portfolio

 

 

 

 

Reality Check

You grant payment terms to your customers every day. And because it’s a routine way of doing business, you may not be thinking about the risk you’re taking.

But what happens when a customer defaults? When a business closes down? When a government suddenly forbids transfer of payments or declares a devaluation?

You might have never experienced any of these situations before, but you ought to know that 25% of bankruptcies are due to unpaid invoices.

how much of your total assets do unpaid invoices represent ... and merit protecting?

 

Want to find out more, lets talk!