The impact of suffering a bad debt on an organisation can range from being an unwelcome and unexpected reduction in profits, right through to crippling the enterprise. Either way it can be avoided by investing in credit insurance.
Without hesitation, most of us will insure our business premises, motor vehicles, plant and equipment and other important components that contribute to the success of our business. Yet too many fail to consider and insure, what is at times, their largest current asset - their debtors ledger.
One way of measuring the value and necessity of credit insurance is by following this simple exercise. Divide the amount currently due to you on your largest account by your company's profit margin. This leaves you with the amount of sales you have recently made for which there has been zero profit if your largest customer falls over. For example, lets say your largest customer currently owes you $250,000 and your profit margin is 8%, the calculation would be as follows:
The reality is, you can never make up that lost profit. So regardless of whether you are a blue-chip public company or a smaller privately owned one, credit insurance will ensure your hard earned profit is preserved.
For more information on how credit insurance can work for you, click here and one of our consultants will be happy to assist, without obligation or cost to you.