With credit insurance pay-outs on the rise, is your cash flow protected?

26/03/2019

Continuing uncertainty caused by Brexit, as well as competition from online sales, weaker consumer spending and rising business rates, have contributed to a challenging trading climate that is causing many UK businesses to protect their cash flow.

New figures from the Association of British Insurers have shown that the number of trade credit insurance policies is at its highest since 2008, with nearly 14,000 policies in place to support British businesses.

In correlation with this, insurance pay-outs are at their highest since 2009, with an average of 50 new claims made every day and the value of claims equating to an average of £5 million every week.

In 2018, credit insurers paid out on several high profile business failures, including £30 million to suppliers of Palmer and Harvey, £11 million on Maplin and nearly £3 million on Toys R’ Us.

And with the risk of late payment and bad debt still so high, it’s clear why companies are increasingly turning to credit insurance to safeguard their businesses.

The ABI’s assistant director, Mark Shepard, said: “Trade credit insurers are helping many UK firms through tough times. Uncertainty around Brexit is only adding to the challenges faced by many firms. Despite this, trade credit insurers continue to support businesses, with their risk appetite remaining high, even in the volatile economic climate.”

By taking advantage of trade credit insurance, many companies have found themselves able to grow and trade with greater confidence, as they are protected against non-payment and bad debts.

Is it for you?

Credit Insurance companies will ensure that, in the event an invoice becomes aged or a customer enters insolvency proceedings, you will still be paid for any goods or services you have supplied, subject to a designated credit limit.

As well as protecting you from non-payment, this cover can also improve your access to funding and may help you to negotiate more favorable terms with suppliers.

There are different policies available depending on your requirements, with full cover insurance offering you protection against your entire sales ledger. Alternatively, selective cover allows you to choose the customers you wish to be covered against, for example key customers, high risk customers or high value invoices.

International cover can provide protection against the credit risks linked to trading abroad and can also include political risk insurance.

If you’re also looking at invoice financing to improve your credit flow, you may want to consider non-recourse facilities, which also includes bad debt protection as a safeguard. Not only will facilities release a percentage of the value of an invoice within 24 hours of issue, it will also cover you in the event of debtor insolvency or protracted default.

Next Steps

If you’re ready to take the next steps towards protecting your business and covering yourself against an uncertain future, Hilton-Baird can help you find the policy that is right for you. To discuss your options, give us a call on 0800 9774833, or contact us via our website.