Tough market conditions mean businesses are being forced to navigate increasingly choppy waters. Brexit challenges, rising debt, a weakening pound and a near record number of insolvencies mean that more and more companies are turning to credit insurance to protect them from bad debts writes Barry Dorrity, Autoline Credit Insurance Account Executive.
While all businesses acknowledge the all-important demands of cashflow; factors such as payment delays, rising online competition and weakened consumer spending are currently hitting hard.
Research from insolvency specialists reveals that almost 7,000 businesses in Northern Ireland were recorded as being in a ‘state of distress’ in the first three months of 2019. In this challenging trading climate, its perhaps not surprising that Trade Credit Insurance claim payouts have hit a 10-year high.
The situation is particularly acute due to the predominance of SMEs in Northern Ireland, which represent more than 80% of the market. Trade Credit Insurance protects against a range of challenges that can make or break any business that extends credit to their buyers. Having a considered and bespoke credit insurance policy in place provides not only peace of mind for business owners, it also helps your credit assessment procedures, while also improving the credit risk management processes within your business.
According to the Association of British Insurance (ABI), in the first quarter of the year an average of 57 firms per day were helped by trade credit insurers. As more and more businesses recognising the requirement for this increasingly critical insurance cover, what should business owners look out for?
A vitally important element of any credit insurance policy is the level of protection against insolvencies and default situations. Some of the credit insurance underwriters provide a fully integrated international debt collection service which provides additional risk management assurance to ease some of the pressure and costs, especially when exporting globally. Working with a highly knowledgeable insurance broker will ensure you have the right level of credit cover and a policy that is based on your unique business needs.
Credit insurance advice can also help reduce the risk of financial loss alongside your overall credit management process. In our experience, relying solely on credit reports and trade references as a form of risk assessment is not enough. Whilst annual accounts are often nine months old when filed, insurance companies can have up to date, real-time information on a potential new buyer. Having a credit insurance policy is essential to manage credit risk effectively and efficiently.
As insolvencies and debt issues continue to hit hard, credit insurance also enables businesses to provide reassurance on company stability to the supply chain in the current challenging environment. With more and more suppliers requesting proof of credit worthiness before providing goods and services, having a credit insurance policy in place is a way to future-proof the company’s financial integrity and demonstrate external confidence – critical factors to steer your business successfully through 2019 and far beyond.