If you have a bad debt of $120,000 and work on a margin of 5%, then you need to generate $2,400,000 of sales to make up the lost profit.
Whilst this calculation can be confronting, the potential vulnerability to bad debts for any business can be even more unnerving when you start to think about how much you really know or don’t know about your customers.
Is your customer being paid? Can your customer in turn pay you? The reality of this situation for any business is that there is no fool proof solution. You can still take all the appropriate precautions including due diligence and investigation of your customer’s business, but risk is a moving target.
Can you easily find an additional $2,400,000 in sales needed to cover $120,000 of bad debt? What else is available in the market to assist you in securing your cash flow? A good part of your solution may be a Trade Credit insurance policy.
Key benefits that trade credit insurance provides include:
- Protect your profits from a bad debt and grow your business with confidence
- Preserve cash flow and secures working capital
- Support and enhance credit management
- Improve security for your financial partners.
As your insurance broker, we can help to mitigate your risks and minimise what can be a significant financial impact on your business should the unexpected happen. If you would like to know more or discuss this further, please contact one of our experts and we look forward to assisting you.