Protect Receivables with Credit Insurance
You insure computers, company vehicles, buildings and cash, but often times the single largest business asset – your receivables – is ignored. For staffing firms and PEOs, extending credit to customers is simply a risk that needs to be taken. In this industry, payment rarely comes at the point of sale. It generally comes after services are delivered, so credit must be extended to customers during the period in which payment is due.
But what if the customer doesn’t pay at the time it’s expected? Slow payment is detrimental to a supplier’s cash flow, and that restrains the growth of a business. Or what if the client doesn’t pay at all? In that case, the staffing company or PEO suffers a loss, and losses have a negative effect on revenues and profits. Too many losses can shut down a business or cause severe harm.
If there’s non-payment, are you covered?
One reason that businesses don’t have credit coverage is that many owners are simply not aware that it exists. Or if they are aware, don’t know enough about it to understand how it applies to their staffing or PEO business.
Credit insurance covers the risk that a customer may not, under certain circumstances, pay a supplier for goods or services sold on credit. The general circumstances covered by Credit insurance include the following:
- Financial inability to pay, for example, due to bankruptcy or some other type of insolvency (such as becoming subject to liquidation or receivership, etc…)
- Protracted default, which means the customer, has not paid a valid invoice that’s far past due although there’s no formal evidence of financial inability to pay; this is often referred to casually as “won’t pay”
Virtually every staffing and PEO business experiences a given amount of customer non-payment. These losses are often planned for, but it’s a large unexpected loss that can hurt a company. Minimize your risk through Credit insurance.
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