Summary
Accounts receivable, which typically represent more than 40% of a company's assets, are naturally a vital component of a healthy business. In the face of today's changing domestic and global economic climate, recognizing and managing future risks has become a priority for the business leaders. A trade credit insurance policy allows companies to feel secure in extending more credit to current customers, or to pursue new, larger customers that would have otherwise seemed too risky. The ultimate goal is not simply to indemnify losses incurred from a trade debt default, but to help the insured avoid catastrophic losses and grow their business profitably. By maintaining a strong relationship between the insurer and the credit management department, trade credit insurance may be the wisest investment a company can make to ensure its profits, cash flow and capital are protected.
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An Overview of Trade Credit Insurance
Financial executives must continuously balance the cost of doing business with the risk of doing business. Each time a dollar of revenue is produced, all costs of generating that dollar have been thoroughly analyzed in an effort to maximize the profit margin. However, the hundreds of billions of dollars in losses associated with bad debt charge-offs in 2002 brought new attention to managing trade receivables.
Accounts receivable, which typically represent more than 40% of a company's assets, are naturally a vital component of a healthy business. If a major customer is unable to pay its invoices, or if several customers are unable to pay their invoices, t...See the full content of this document
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