Trade credit insurance for business strength and resilience

Trade credit insurance for business strength and resilience

Implementing robust insurance cover is an important part of any efficient business management plan, but for some companies, unique industry factors can pose an elevated level of risk. Organisations in the building, construction, manufacturing and retail industries are exposed to credit risks, which can result in significant financial loss for a company. Whether companies become insolvent or default due to economic conditions or tax debts, the implications for its suppliers can be financially catastrophic. Coverforce trade credit insurance specialist Peter Ghaleb said protecting the cash flow of a business with trade credit insurance is imperative and should be a priority for any company.

“Cash flow is the lifeblood of the business, without cash flow, there is no business,” Mr Ghaleb explained.  Trade credit insurance can be a lifesaver in the event of bad debtors – ensuring enterprises are financially equipped to continue with day-to-day business dealings. “By having a policy it helps you improve your credit control and management procedure,” Mr Ghaleb added. “It benefits sales and profitability, allowing you to do more business, grow with confidence and even sleep better at night.

“During uncertain global economic conditions, the importance of implementing a robust management procedure is intrinsic – helping businesses remain unaffected by the potential folding of its customers. Mr Ghaleb said when high-profile companies collapse, it also drags down other companies, including suppliers. “It’s the domino effect,” he explained. “It doesnt’ matter how you good you are at managing your debts, you can’t control their affairs.”

In the 12 months to August, the number of Australian companies entering some form of insolvency administration increased by 19 per cent when compared with figures over the last five years – highlighting the vulnerability of businesses in the current economic climate. While most other business risks can be mitigated to a degree, Mr Ghaleb said the financial situation of debtors is completely out of your control – leading trade credit insurance to be one of the most important business tools.

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