Accounts receivable are often a business’s largest asset. If your customers are unable to pay what they owe, potential bad debt losses can present a substantial threat to your business. Accounts Receivable insurance is a form of insurance that transfers risk of businesses seeking to protect their accounts receivable against nonpayment.
Accounts Receivable Insurance, also known as Trade Credit Insurance, should not be confused with any reference to accounts
receivable insurance often shown as an extension on a business insurance policy, which refers to the direct loss or damage
of account receivable records and resulting expenses.
Accounts Receivable insurance policies are created to suit your needs and offer a number of important benefits:
- Improved sales. Businesses with Accounts Receivable insurance can boost their sales by offering customers and prospects more favourable credit terms while eliminating the need for costly letters of credit.
- Access to new markets. Accounts Receivable insurers offer protection against unique export risks by providing
businesses with the market knowledge needed to make informed decisions in foreign markets.
- Insolvency protection. In regards to sales made on credit terms, Accounts Receivable insurance protects
organizations from the risk of a customer default or insolvency.
- Cash flow relief. Accounts Receivable insurance provides cash flow relief when a business’s customers become insolvent or do not pay their bills on time. Losses can be indemnified, allowing the business to maintain its cash flow.
- Reduce concentration risk. Accounts Receivable insurance mitigates risks for businesses whose bottom line is
dependent on a select number of customers.
- Accounts receivable support. Accounts Receivable insurers offer business access to professional trade credit
analysts who can share best practices with a company’s Credit Department.
- Collection services. Accounts Receivable insurance provides access to cost-effective collection services.
- Facilitate bank financing. Banks will typically margin 90% of Insured Accounts Receivable.
- Portfolio monitoring. Accounts Receivable insurance also provides access to professional portfolio monitors
who track customers’ ability to meet their financial obligations to the insured business.