Insurance Policy Help Legal Care Trust Protection Protection Concept
Credit: Insurance Policy Help Legal Care Trust Protection Protection Concept
Many businesses mistakenly think of credit insurance as a large expense, and so choose not to take out cover. This can leave them exposed to unnecessary risk.
Credit insurance is often seen as more expensive than other insurance products. However, policies can be tailored to the business’s needs and only make up a small percentage of overall costs. The expense is reasonable when you consider that taking out cover can save the business from insolvency.
Businesses that don’t need to make a claim may not see an immediate return on investment. There are many less-obvious benefits of credit insurance that provide a return on investment.
We have identified four key ways credit insurance provides a return on investment:
1. Increase trade
Having a policy lets businesses trade confidently with new customers and in new markets. This helps to increase sales and grow profits.
Mark Hoppe said, “Good credit insurance providers have people on the ground all over the world so they can offer information and advice to help businesses successfully enter new markets.”
2. Greater insight into payments
Providers have information on the creditworthiness, reputation and financial stability of businesses globally. Having credit insurance means businesses can gain insight on potential customers and how likely they are to make payments, helping them make informed business decisions and prevent loss of profits.
3. Efficient processes
Businesses without credit insurance can waste time and resources chasing customers for payment. Having policy coverage ensures payments are followed up promptly and efficiently so the business can focus on other strategic goals.
4. Protect receivables
Most businesses insure their key fixed assets, such as equipment or offices, but fail to protect one of their key and most liquid assets, their debtors. Credit insurance offers this protection and helps to drive the business’s working capital and profitability.
Australian businesses need a better understanding of the risk they take on without insurance policy. In other markets, particularly Europe, businesses know the value of protecting one of the largest assets on the balance sheet and trade receivables – and commonly invest in credit insurance. Australian businesses have to catch up with their European counterparts to achieve the same guarantee of payments and confidence to trade.