Insuring Receivables Against Customer Bankruptcies
Insuring Your customer receivables is a must in today's economic situation.Its inevitable that your company will have to deal with customer bankruptcy. The following article outlines 5 well defined benefits and strategies for using receivables insurance that every company should know
Every Company wants to make it through this crisis without incurring huge losses.However,we all know that simply isn't going to happen.Every organization,regardless of size, has been affected by the recent recession.It's inevitable that some of your customers will go bankrup,if some haven't already. However, is there something that could have been done to recoup these losses? At the very least, isn't there anything that could help mitigate the amount lost by customers unable to pay their invoices? Yes, there is a way to protect your business from these unforeseen customer bankruptcies
Insuring your customer receivables makes good business sense:
Sure, this is an added cost , and it's not fun to pay for insurance , but when a customer goes bankrupt , it suddenly makes a lot of sense.Insurance on your receivables offers that peace of mind you need to properly manage your customers accounts.Aside from this current economic situation , business bankruptcies worldwide have always been a problem.Insuring your receivables is a cost, but it's worth it . How does insuring your receivables work? Should a customer go bankrupt ,your outstanding invoices will have a portion of their value covered. So , if your company had this insurance , and it covered 75% to 85% of the value of your receivables , then when a customer who has $100.000.00 owing suddenly goes bankrupt, your insurance claim would allow you to recoup $75.000.00 to $85.000.00 of the amount outstanding.Your company's out of pocket losses are $25.000.00 to $15.000.00 respectively.It's a loss , but nowhere near as bad had you not had the insurance.Most bankruptcy laws, regardless of country, won't allow you to claim any of the prior outstanding receivables once a customer goes bankrupt. Your company no longer has any right to claim any of the prior amount owing.If a customer files for bankruptcy protection, and still plans on operating, then your company usually has to decide between continuing to sell product to them under prepaid conditions, or server the relationship. It's not an easy decision,but one that becomes that much easier when you have insurance.
