There is clearly a great deal of unease at the moment and many businesses see this as a reason to look inwards, delay investment decisions and take an extremely cautious approach to trading.
However, even at a time of economic uncertainty, there is a way to seize the initiative, trade with confidence and take advantage of new opportunities.
Credit insurance can be a particularly valuable tool in a company’s credit management armoury and this short guide will help you understand, not only how it can protect you from bad debt, but also how it supports business growth.
Knowledge is power
The more you know about a customer, a market or territory before you start doing business, the better equipped you are to manage the risks and maximise the opportunities of your trading relationships.
Amid the excitement of a new customer it can be tempting to rely on websites, directories or references, but you need a reliable way to verify that you are dealing with a legitimate business – after all people can create the illusion of a reputable business very easily. And as for references – if a company has ever had an unfavourable reference from a bank or trading partner, you can rest assured they won’t let you or anyone else see it.
A reputable credit insurance provider is the ideal source of information on customers. The data is sure to be up-to-the-minute, because credit insurers need the most current data in order to assess their own risks accurately. This approach not only minimises any adverse effects due to an unforeseen failure, but also enables companies to focus sales efforts on financially healthy customers.
Win more business with competitive and attractive trading terms
The balance between winning business and setting payment terms is just one of the challenges a business faces. Amid the excitement of new orders or an increased order from an existing customer maintaining a positive working capital is a necessity.
A customer may well be inclined to buy more, or more often, with an extended credit line and a new customer may find you a more inviting prospect if you didn’t need to insist on advance payment – but is this a risk you can take?
A frequently neglected benefit of credit insurance is that it opens up the possibility of negotiating more favourable terms with suppliers and customers. It may also enable you to access loans, overdrafts and funding on better terms which you can then pass onto a customer.
An insurer will also regularly evaluate each of your customers to make sure you are trading at the right credit levels. This not only protects you from trading on risky terms, but it gives you the opportunity to gain competitive advantage by extending credit to more financially robust customers.
Protect your sales revenue
You have done everything right and undertaken due diligence on a new customer. However, non- payment still occurs, leaving you with an unexpected gap in your cash flow. How can you protect yourself from this?
The truth is that no company is immune from the risk of a bad debt, and one insolvency can cascade through a business network. You may know your customer, but you do not necessarily know their customer. A credit insurer will.
A credit insurance policy is the simplest most cost-effective way to replace cash-flow lost through customer insolvency or non-payment. In addition to this, making a claim through Coface is straightforward and once assessed and validated, claims are paid within 30 days. This allows you to focus on growing your business rather than worrying about whether you will be paid.
As with most aspect of business, preparation and intelligence are the keys to success and if a company takes the right advice, runs the right checks and takes the necessary precautions, they can not only manage the uncertainty but take advantage of any opportunities which arise.
This article has been brought to you from Coface – a world leading credit insurance provide