The cost of a ‘bad debt’ should be treated much more than simply the loss of money owed. The truth is, one can never make up for the cost of a bad debt. The impact can put stress on cash flow and will damage a company’s bottom line. What would be the consequences of one of your largest customers failing to pay?
The value of the debtors’ ledger (money owed) is one of the largest assets of a business and yet it is often not insured. Other business assets are normally insured, yet the risk to a business of customer insolvency is one of the most volatile exposures.
5 questions to ask yourself
- What would the impact on your business be if your largest client could not pay you?
- When was the last time you reviewed the credit worthiness of your top 20 risks?
- How do you assess the credit worthiness of a new or potential client?
- How do you monitor the credit risk factors of your debtors?
- What do you do when an account becomes overdue?
5 reasons why you can sleep better tonight
- Preserve profit
Too often and too late businesses realise that a bad debt is really lost net profit; a bad debt reserve is not the answer. It won’t put cash back in your hands. - Protect liquidity and cash flow
The proceeds of a credit insurance claim inject liquid funds back into a business. - Confidence to expand
Allow growth, knowing that the cost of potential failures has been covered. Hold a competitive advantage whilst others operate with uncertainty. - Strengthen credit management
Firm credit limit decisions are provided on the larger debtors of the business, based on sound analysis and information. - Add security
Insuring your debtors ledger often provides a new source of security to offer banks.
Download our Trade Credit Brochure.
