Staying Safe in the 80/20 Ball Game
When large companies go bankrupt, they often take their vendors and suppliers down with them. What would happen to your balance sheet if your largest client suddenly filed for bankruptcy and you were no longer able to supply them with temporary workers? Aside from the loss of future revenue, you might find yourself facing a sizable accounts receivable default. Do you have sufficient bad-debt reserves to absorb such a loss?
How to Bat 1.000 When Facing a New PitcherAccounts Receivable insurance can help protect your staffing company from a catastrophic accounts receivable loss. Each policy is tailored to the insureds individual needs, so you can decide whether you wish to insure all your accounts or only a select few. The underwriter will conduct credit evaluations on the accounts you wish to insure and approve them for specific credit limits based on your requests and the results of their research.
Although protecting your firm from a catastrophic accounts receivable loss is the primary function of Accounts Receivable insurance, there are a number of ancillary benefits of this type of coverage outlined below.
- Expand your sales with less risk. When your receivables are insured, your staffing company can expand its client base without worrying about accounts receivable exposures. Whether its expanding into new markets or just selling more to your existing clients, dont let the fear of an accounts receivable default limit your growth.
- Reduce your in bad-debt reserves. Insuring your receivables allows you to reduce your bad-debt reserves, which frees up assets that can grow your business or pay off debt.
- Maximize your available working capital. Lenders will often advance more capital against insured receivables because they know the default risk is reduced,
- Leverage credit risk expertise. An industry-specific financial analyst will actively research and monitor the accounts you wish to insure. You'll receive regular reports about your accounts, so if one of your clients encounters financial difficulty, you'll learn about it quickly.
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