Magazine article Business Credit

Software and Automation Are Great. but What Happens When Customers Don't Pay?

Magazine article Business Credit

Software and Automation Are Great. but What Happens When Customers Don't Pay?

Article excerpt

While front-end solutions like processes, software and automation designed to manage and collect accounts receivable are continuously improving, they all share one shortcoming: the risk of non-payment still rests with the creditor. If the customer doesn't pay, you're stuck. For this reason, many credit managers buy credit insurance.

What is credit insurance? It's a way for businesses to protect their accounts receivable. A credit insurance policy ensures your company will be paid for merchandise or services delivered to your customer. If a company goes bankrupt or is unable to pay, you can stilt get paid on insured accounts. Coverage is available for both domestic and export accounts. Credit insurers maintain extensive credit histories for literally millions of companies around the world.

For most businesses, accounts receivable is one of their largest assets. For many American companies, which tend to build their business around a handful of large customers, just one default by a major customer could spell doom. Indeed, customer default is more common than theft, flood or fire.

More than half of European companies use credit insurance; fewer than 1 out of 10 American companies do. But lately interest among American companies is up. Inquiries for credit insurance in the first six months of 2011 have increased 25% over the first six months of 2011. Insurers offer two reasons: First, there has been a strong increase in U.S. exports. Credit insurance is a very cost-effective way to ensure payment from overseas customers. …

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