A sale is not a sale until it's paid for, and trading on open credit terms is certainly a risk worth reducing.

How do you reduce that risk?

Credit vetting your customers is a process of examination and evaluation, which often leads to performing a background check on potential customers before giving them credit terms. 

A financial report from an information provider is often a good start but that cannot give you money back in the event of a customer not paying outstanding invoices.

What happens if a customer doesn't pay when due date arrives?

What happens if they call in the Administrators BEFORE they pay your invoices?

You will probably have to write that bad debt off and attempt to recover lost monies elsewhere - if you can still manage to trade after such a hit to your cashflow !!!

This is where Trade Credit Insurance is different. Your Credit Insurance Policy gives you comfort and peace of mind in knowing it will pay you if your customers don't.

Credit Insurance will give you information on a potential customer BEFORE you decide to trade with them AND monitor them across the year.

How does Credit Insurance work?

Credit Insurance / Bad Debt Protection / Invoice Protection can protect a company against bad debts and non payment of invoices due to Insolvency and/or Protected Default.

A typical Credit Insurance Policy requires you to have a credit limit on each of your customers/buyers. A credit limit can be applied for with the insurer or set by yourself , up to a pre-determined level set within the policy (Discretionary LImit).

The credit limit amount should be enough to cover the highest outstanding amount in any one time, taking into account the terms of payment you have granted your customer.

If a customer has not paid outstanding invoices after a pre-agreed time AFTER due date (usually 45 - 60 days), the account MUST be reported to the insurer.

A typical claim arises when, under Protracted Default, the buyer has still not paid after a pre-determined time (typically 6 months after due date).

In the event of a customer becoming Insolvent / in administration before they pay outstanding invoices, the Insurer often settles the claim within 30 days of confirmation from the Insolvency Practitioner that the debt does exist in the books of the failed company.

A claim will only be paid if all credit limit and reporting criteria have been met and no policy premiums are outstanding.

* The above is a guide only of a typical wholeturnover credit insurance policy and should not be used to replace or determine your own credit insurance policy's terms & conditions.

How much does it cost?