How to protect your company against bad debts

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The risk of customer non-payment is significant for many businesses.

Debtors often account for 40% to 60% of a company’s current assets, and can be as high as 90% for a services company.

It is, however, the asset over which a company has the least control.

Credit insurance exists to protect against the risk of non-payment for the provision of goods and/or services supplied from one business to another on credit terms.

Non-payment usually arises when the customer becomes insolvent but unpaid invoices can also happen because the business concerned simply has insufficient funds to pay its debts.

Companies that export may well be faced with considerable additional uncertainty and risk, which is why they often consider credit insurance invaluable. As well as providing protection in the event of non-payment, it can help with making credit decisions on customers in unfamiliar countries or when collecting overseas debts.

Exporters may also be faced with the additional threat of non-payment as a consequence of political risks such as war, acts of overseas governments, import and export restrictions, currency transfer restrictions and inconvertibility. So, for businesses selling goods or services on credit to other businesses, home or abroad, credit insurance may well be suitable.

In addition, while credit insurance is widely viewed as a tool to protect a company’s profit and loss statement and balance sheet against the impact of bad debts, it is also suitable for companies seeking a credit management solution that covers credit checking and collections, those seeking to grow sales securely or those seeking support for finance.

Arthur J. Gallagher specialises in risk management and insurance solutions. It has a regional network of client-focused branches in more than 70 locations, including Sheffield. Each branch is dedicated to providing local service and support to businesses, backed up by national industry specialisms.

The above information is for general guidance only, but to find out more, or to discuss your insurance and risk management requirements, email Steven Lunn on