Time to look at the risks facing your biggest asset

Its a familiar problem to every business - your biggest asset isnt your bank balance; its the money youre owed

. Indeed, research in the small and medium business sector shows most firms believe that the biggest risk they face is the collapse of a major customer with outstanding debts. This fear is well justified every insolvency sets off a domino effect, toppling a large number of suppliers down the line. This scenario could become increasingly common in todays economic climate. The credit crunch grinds on with personal bankruptcies at an all time high and house repossessions on the increase - the fear of a full-blown recession is growing accordingly and this is bound to impact on the solvency of businesses. All these factors mean that now is the right time for businesses to consider very seriously how much they are owed and whether they have sufficiently strong procedures in place to minimise the risks of any customer going into liquidation. In reality, very few companies take the trouble to protect themselves with a robust credit management policy combined with credit insurance. Too often, optimism is allowed to rule and businesses accept uninsured orders without proper checks on customers ability to pay. Used correctly, credit insurance can be the core of a companys credit management policy. Taking out this type of insurance provides a wealth of online credit information because credit insurers receive a stream of intelligence from a range of sources including rating agencies, other companies, banks, policyholders and clients. As well as protecting you from risks, this information may have a welcome side effect in helping your sales force direct their efforts towards those clients that are most likely to meet their bills. As a result, credit insurers can give early warnings when a business is failing to pay promptly and offer an overview of its performance. For good measure, they can assess not only British companies but also foreign firms, where the risk would be far harder for an individual UK firm to check. Credit insurance is a low-cost way of ensuring that your business isnt harmed or destroyed by an unexpected bad debt, wiping out many years of your hard work. With trading getting more difficult all the time, now is a good time to insure your greatest asset.

Time to look at the risks facing your biggest asset

By: giles ford

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