What you can’t see can hurt you: Keep the blood supply flowing to your business with appropriate credit insurance

By Ron Doyle

In 2008, major international credit insurers paid out or reserved over 4 billion euros in claims. In Canada, Canadian credit insurers, including Export Development Canada, paid $183 million in claims and so far this year, over $10 million in claims have been paid to Millennium clients alone.

These numbers are staggering and definitely show that credit insurers do pay claims, but more notable is that the shipments that resulted in these claims were made prior to 2008, before the effects of the present-day recession became evident. The beneficiaries of these claim payments bought credit insurance, as a prudent risk management decision, when risks were low and insurance capacity was available at a very reasonable price.

Credit insurance must be considered as a normal risk management tool, which is put into place as a continuing program, so that it will be there if an unforeseen risk occurs. Prudent risk management of accounts receivable, through credit insurance, can provide tangible benefits even in good times.  It allows for better valuation of accounts receivable, increased sales, lower inventories and improved profits. Often, the gross margin on incremental sales more than covers the premium cost.

Yet it is amazing how little companies know about the tangibles benefits of credit insurance in managing one of the major assets on their Balance Sheets and in their Cash flow ­– the lifeblood of any business. Think of a potential bad debt as a blood clot silently moving through the system to choke off the blood supply to the heart of the business.

Keep the blood supply to your business flowing. Contact your ICBA broker today.

(Ron Doyle is a founder of Millennium CreditRisk Management – credit and political risk insurance specialists – www.mcm.ca. ICBA is the world’s largest team of independently-owned, specialist trade credit insurance brokerages. Partners combine local service with global coordination to provide credit and political risk insurance solutions for multinational companies.)