Increase in bankruptcies
One thing is certain, the above facts are going to have an effect on our economic growth. For instance, the number of bankruptcies will increase next year. And that, of course, is not surprising. Many companies that had problems before Covid-19 were kept alive by the Dutch government's support packages. With these support packages disappearing, these companies will eventually fail. In any case, we will again return to the 'normal' number of bankruptcies.
Assessing creditworthiness
In uncertain times, it is advisable for you, as a business owner, to be extra vigilant. Check how good (or bad) your customers' creditworthiness is. Monitor and monitor this closely. Are you accepting new customers? Then test their creditworthiness. After all, companies that find it harder or impossible to get materials from your competitors will shop around, and may end up with you.
Credit insurance benefits
Credit insurance is the ultimate tool to help you do this. Credit insurers have the most comprehensive database of financial information on your customers. And more importantly, since they also have to insure the receivables, they provide reliable advice. Already during the financial crisis in 2008/2009 and now, with the outbreak of the Covid-19 pandemic, huge numbers of companies are sending financial information directly to credit insurers. Supplier credit is vital and much needed for many companies. Hence, they want credit insurers to provide adequate coverage on them.
In addition, credit insurance is a stick to manage credit risks properly. Particularly with rising commodity prices, we are seeing a huge increase in outstanding receivables from customers. This also means that business risks are rising sharply. To ensure the continuity of your own business, a credit insurance not a luxury.
Coverage ratio on customers
You may be wondering if credit insurers are providing sufficient coverage and not just covering gold-rigged companies? Since the Covid-19 outbreak, the coverage ratio on buyers at credit insurers is again sky high. So credit insurers do provide cover. And as mentioned above, many buyers cooperate and are willing to provide financial data, which often allows them to get coverage after all.
If a customer's financial data is indeed very poor, or a customer is unwilling to provide it, then you really need to ask yourself whether you want to do business with that particular customer. Or whether you might choose to make other payment arrangements. But even if you do decide to do business with the buyer in question, with this information from the credit insurer, you will make a more informed decision and be more alert. Even if the credit insurer struggles to provide sufficient cover, they will offer alternative solutions to still obtain the desired cover, the so-called top-up coverage. Read more in this article.
Conclusion
Even in uncertain times, there are more than enough opportunities, perhaps even more opportunities. But you also need to be more alert to risks and eliminate them as much as possible. Debtor risks are often substantial risks, but with alert debtor management and credit insurance they can be managed well.
