If you trade or sell goods on a credit basis, your at risk of bad debt or the non payment of customers. This can disrupt your cashflow and leave you out of pocket.
Trade Credit insurance is important for protecting your income and business assets against potential customer failure. With the right cover, you can grow your business confidently, knowing you can be protected if things go wrong.
All registered businesses that sell goods and services on credit terms, such as 30 days to pay, should consider trade credit insurance. This includes businesses that trade domestically and internationally.
Some trade credit insurance policies also offer the bonus of working with designated collection agencies to help you recover your debts – taking the pressure off this difficult and time consuming process.
”Late payment have continued to increase, this suggests that some of the weakness evident in the economy early in 2017 has impacted the time it takes firms to pay their bills
(Dun & Brad Street Economic Adviser advised in 2017)
On average , 59.8% of Australian businesses pay their bills on time, while 9.5% pay more than 60 days beyond invoice terms. (Dun & Bradstreet, late payments in Australia, Dun & Brad street 1St Quarter Analysis 2017 )
The average late payment time for Australian Businesses is 15.3 days late. (Dun & Bradstreet, late payments in Australia, Dun & Brad street 1st Quarter Analysis 2017)
Big to small payment times showed a clear pattern of larger firms at a delayed rate : big companies even later, (Dun & Bradstreet , late payments in Australia , Dun & Brad street 1St Quarter Analysis 2017)
Depending on your policy, Trade insurance can cover you against :
Protecting your entire Credit portfolio, including domestic and export customers
Suitable for business with strong internal credit management processes who want cover for exceptional loss across their entire portfolio
Covers Key Account for clients requiring protection on their largest buyers ; optional -cancellable credit limits and deductibles
Covers Single Buyer coverage for quality credit risks
Exclusions the excess you need to pay and limits of liability can vary greatly depending on your insurer. Polices generally wont include cover for ;
As small wine maker who has been exporting oversea’s for five years, Debra faces two challenges . Like other winemakers, she has long working capital cycle. Secondly, there’s the risk of non Payment especially among new export clients.
Debra only exports small shipments and takes out trade credit insurance. This strategy pays off, as she sends a shipment to a new client who doesn’t pay.
After unsuccessful attempts at getting the payment, Debra makes a successful claim on her trade credit insurance.
The insurance payout covers her loss, which fills the gap that the non payment made in her cash flow. This Means she doesn’t have to borrow money to keep her business going.
Sentinel Risk Managers is a member of the largest insurance broker network in Australasia, the Steadfast Group.
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