There is always a chance you may be transacting with a fraudulent client and the thought can make any business owner wary. There is a lot of trust required in a business relationship – it really is a matter of whether the client will keep their end of the bargain or not. When you are faced with a client who reneges on their end of deal, which is more common than you think, protecting your business should be a priority.
Credit insurances offer a sense of security for every transaction you will have in the foreseeable future and can be one of the most effective ways to protect your business for longevity.
Protecting Yourself with Credit Insurance
As a business owner you need to think about the worst case scenario and how you can protect yourself from its possible effects on your business. Sometimes clients and/or other businesses that your business works with can get themselves in trouble and fall behind in payment, or worse, end up filing for bankruptcy, which will ultimately have an impact on your cash flow.
Acquiring credit insurance will protect yourself and your business from clients who have failed to make any payment. By having credit insurance, you are confident that you will be paid one way or another as long as you have delivered the product or service well.
The two main benefits of getting credit insurance are:
- Insolvency of your customers which covers bankruptcy, liquidation and administration
- Non-Payment which covers you in the event your customer either skips and cannot be found, you receive a court judgement.
You will easily be able to receive the benefits of the insurance once it is triggered, meaning your claims will be deposited to your account and you can continue with your business as usual.
Other Credit Insurance Benefits:
Besides the comfort of knowing that your business will be protected if any of your clients do get into financial trouble, there are a number of other benefits that your business may experience from having Credit Insurance.
Take On Business Opportunities
Credit insurance will allow you to make important business decisions with more confidence. For example, you may be able to take on larger accounts that could help your business expand in the future. You may even be able to tackle foreign markets with more confidence.
Credit insurance gives you the assurance that accounts receivables will be paid, allowing you to be more bold and aggressive compared to competitors who are too afraid to take the financial risk of expanding.
Debt Collection Service is a Plus
Credit insurance offered by JMA Credit Control offers a free debt collection service when a client doesn’t pay on time. This means that we will attempt to recover the debt on your behalf. There is no need to worry about additional cost, as the policy covers 100% of the debt collection cost and even covers a certain percentage of potential legal costs.
Credit Management is Improved
A smart business practice is learning more about potential clients and their credit history. Your credit insurance will be able to cover this because the underwriters of the policy make sure that you have manageable credit limits. You will also be receiving reports on your clients that highlight their creditworthiness and financial strengths.
Easier Loan Application
You may need financial assistance in the future and showing a bank or creditor that you have credit insurance shows them that you have a strong grasp of your accounts receivables, giving you a level of security that can’t be found with someone who has no credit insurance at all. You will see how easy it will be to be able to be granted loans because of the credit insurance.
Do I Need Credit Insurance?
Availing of credit insurance grants you security and peace of mind, no matter what type of business you are handling. It will certainly be beneficial to businesses that offer credit to clients and who wish to expand their business by acquiring larger (and potentially financially risky) accounts. Learn more about our Credit Insurance here.
Can I Recover Debts if a Client files for Bankruptcy?
Unfortunately you may encounter a client who has filed for bankruptcy and when this happens, what happens to their overdue/outstanding payments? If you don’t have credit insurance, how can you recover debt?
A trustee is usually assigned to distribute any eligible assets and they will determine the priority of the debts incurred by the debtor.
If you want to try to recover debt, you should be able to file your claim with the bankruptcy trustee. Your debt will most likely fall under “unsecured debt”, a type of debt that has no legal security interest over the debtor’s property. All unsecured debts are paid last; trustee’s fees, government charges and payments to banks and other secured creditors are paid first.
While you might get paid, don’t expect that you will get the full amount. Contacting a debt collection agency will help you decide whether it is even worth your while to attempt to recover funds. The agency will be able to delve deeper into the company in question and determine whether it is still in your best interest to pursue debt recovery at this point.
If you do have credit insurance, your policy covers you in the event of a client filing for bankruptcy.
Be a Proactive Business Owner
A smart business owner is a proactive one. Aside from getting credit insurance, there are simple ways to prevent yourself from getting into a sticky situation involving bad business debts and bankruptcy.
Terms of Trade
Terms of Trade is a contract between both the business owner and the client. It outlines and explains the terms and conditions of the conditions of the transaction. This type of agreement should protect both parties: it assures the client that they will receive quality products and/or services; and that the business will be paid after the delivery of such goods or services. The terms of trade includes details such as:
- Payment schedules
- How the business will be paid
- Actions taken for late payment as well as non-payment
- Any legal action you may enforce
A professionally written terms of trade will be legally binding when both parties have signed the contract.
Running a simple credit check will help you decide whether it is smart to do business with a potential client. A credit check shows you information about the individual’s spending habits and how diligently they have been paying their bills and loans. Understanding the credit history of any potential new customers is something JMA Credit Control can help with. We offer a credit reporting service that can save you time and money in the long run.
A professional relationship entails clear communication channels between the client and business owner. Get in touch with a client as soon as there is an overdue payment. Waiting or feeling embarrassed about reminding them of their debt will not be beneficial for your business, nor theirs.
When you have gotten in touch with your client, find out why they have not made any payment yet and when they intend to pay. If they have not yet made any payment, and have no intention of doing so, it is time to get in touch with a debt collection agency.
Contact JMA Credit Control
A reputable debt collection agency will be able to recover debt on your behalf. We know that running a business is not easy. Leave it to the professionals to handle this delicate situation and enforce steps that will lead to debt collection success. Contact the team at JMA today.