While we buy insurance cover for almost all our business assets, we often ignore the debtor’s ledger, which covers approximately 40% of your total company assets. It is very difficult to run a business without providing your customers with a credit line through which they can make payments on a later date, it can range anywhere from 60-90 days.

However, often customers either fail to pay after the credit term has ended or do not pay at all in situations of insolvency. When the cash flow does not come back from your debtors on time, it not just affects your current working capital but also hurts the future profitability of your company.

This is why every small to the large business owner must buy a customized credit insurance policy. Trade credit insurance Australia from Niche Trade Credit can protect your business from crippling due to loss of cash flow, which cannot be recovered even if you have a reserve for bad debts. Their credit solutions fill in the gaps that are created by discrepancies in your trade receivables account so that your production line keeps functioning in its usual way.

When your company is involved in cross-border trade, the number of risk factors increases even higher. From political agendas to change in trading policies, from local riots to natural disasters; your business will always have higher stakes than those working in the domestic market. Formulating credit insurance policies by inculcating a cautious attitude towards underwriting these risks is very essential when you are trading with an international buyer.

Credit insurance for accounts receivables – Benefits

Offers protection for unpaid invoices:

  • Business owners seek credit insurance for this primary benefit.
  • It helps in returning the cash lost in bad debts by almost 90% of the invoice value.

Helps in taking legal actions against defaulters:

  • The cost involved in recovery of debts or taking legal action against defaulters is often covered by credit insurance policies.

Acts as security when you are seeking financing:

  • When your company has a credit insurance cover, it can be used as collateral for seeking financial aid from banks and other financing organizations.
  • The banks will see that their money is safe because you have protected your profits and accounts receivables.

Makes your credit management system stronger:

  • The insurance providers also help in creating strong policies for credit management for your company.
  • This can help you in dealing with future cash flows in a better way.

Helps you in the expansion of your business:

  • When you have the surety that your cash will be paid for your account receivables, you can take more chances to expand your business to newer markets.

While buying a credit insurance policy is a wise decision especially for small business owners, it does come at a cost. The premium that you will pay to the insurance provider will depend upon many factors, the most important being your annual turnover and your customer’s creditworthiness.

The benefits provided by trade credit insurance outweigh its cost in most cases because bad debts can strike any business format at any time and is not a rare occurrence but happen quite frequently. This is why credit insurance is a smart choice made by most businessmen dealing with unstable market structures.