You sell on open account without Trade Credit Insurance? Time to think again….

With the present economic turmoil caused by the Corona Virus and fall in commodity prices many companies, also large and reputable ones, might come into serious financial difficulties without giving warning signs and within a short time frame. Airlines, Hotels, Retailers and the Entertainment Industry are only some examples which are obvious for everybody – many other companies in other industries might not be on everybody’s radar screen yet. One mitigation strategy to avoid bad debt but still keeping competitive by selling on open account is to have a Trade Credit Insurance in place.

What is a trade credit insurance?

A Trade Credit Insurance protects your business from bad debts as it insures your accounts receivable and protects your business from unpaid invoices caused by customer bankruptcy, default, political risks, or other reasons agreed with your insurer.

The following are arguments why companies should have a Trade Credit Insurance in place even if in the past the default rate of your customers was limited:

·         Competitiveness: It helps you remain competitive by enabling you to offer open credit when your competitors can't

·         Growth: It facilitates expansion with security and allows you to deal confidently with new clients and increase credit lines to existing ones

·         Confidence: It provides you with confidence to enter new markets, including overseas

·         Improve profitability: by safely increasing your exposure to more customers

·         Speed in decision making: It helps you make the right decisions more quickly, improving efficiency and ultimately profitability

·         Better decision making: You gain access to greater customer intelligence that leads to balanced risk decision

·         Supports bank financing: improves banking relationships and access to finance when the bank knows that the receivables are insured against losses

·         Risk mitigation: It complements and enhances existing credit control procedures

·         Peace of Mind in troubled times: Feel safe in the knowledge that your outstanding invoices are protected

How much does trade credit insurance cost?

It is not expensive compared with the advantages such an insurance has. As indication its in the low single digit % of your insured receivables.

The cost of Trade Credit Insurance is calculated as a percentage of the total turnover of the applicant combined with the level of risk. The insurer will assess the risk based on trading history, customer ratings, credit terms, loss history, business sector, customer location and other factors. Insuring accounts receivables is different to any other insurance policy when it comes to questions about cost. As with most insurance policies, price is calculated against risk and specific requirements, which means that every policy is priced individually. The cost can be reduced by adjusting the own risk portion.

Which Trade Credit Insurance supports customers in Indonesia?

We cooperate in Indonesia with Euler Hermes (Rated AA by S&P), which belongs to the Allianz Group. 

https://www.eulerhermes.com/en_global/discover-euler-hermes/our-activities.html

In case you want to learn more and would like to get a quotation please feel free to contact us and we will do an introduction.