The market for trade credit insurance – which protects against the failure of a trading partner – is at an all-time high of £315 billion in the UK, according to the Association of British Insurers.
That is the total amount of turnover protected by the trade credit insurance market in 2014, with nearly 10,600 insurance policies taken out over the course of the year.
According to the ABI’s figures, more than 10,300 claims were made, but this represent a fall of 1.9% year on year, despite the increasing size of the market by value.
The ABI says trade credit cover is particularly useful for small businesses, not only in terms of protecting their cash flow when a customer is declared insolvent, but also in obtaining finance and protecting growth.
Mark Shepherd, manager for general insurance policy at the ABI, said: “Without this insurance in place, companies are at risk of large financial losses, and potential job losses if a company they are supplying gets into difficulty.”
“As the UK economy improves, trade credit insurance provides reassurance and encourages businesses to expand, supporting sustainable growth.”
Of course, prevention is better than a post hoc payout, and careful credit control measures mean checking new clients before agreeing to supply them.
By running careful background checks, you can identify any causes for concern in companies’ accounts – which can be everything from red flags in their past finances, to frequent changes of registered office address and company directors.
With the help of an outsourced credit control company, you can focus on working with clients that pose the least apparent risk to your cash flow – and hopefully avoid having to make a trade credit cover claim further down the line.
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