Debtors who pay late can cause a problem for liquidity. This limits entrepreneurial freedom, there is less working capital available to do business, and it costs a lot of money as well as time to collect unpaid invoices.
Credit insurance and other financial solutions should provide protection for this but these are often not customized and therefore do not provide the optimal protection. Credit risks are different for every company. In fact, each company has its own unique combination of corporate culture, product and buyer-market, which requires customization.
Our view is that only one integrated approach to credit risk will provide a solution, looking at streamlining all internal processes to reduce risk. This requires sharp analysis and risk assessments with knowledge of credit management, sales, operations and finance.
Once the actual-fictional credit risks are identified, preventive measures can be taken that will strengthen cash flow, make receivables management more efficient, and possibly change the way insurance needs are viewed. For example, credit insurance and factoring can help protect your financial position, but only when they fit your actual risks and your financial headroom.
Insurers and policyholders have a conflict of interest. The insurer wants maximum premium for minimum coverage while the insured wants the opposite; to pay minimum premium and get maximum coverage. At the same time, an insurer benefits from delivering standard packages.
An independent insurance broker can help “enforce” customization with the insurer. They know the right inputs. They speak the insurer’s language. And through their reporting and analysis, they realize better terms, at more competitive rates that match the organization’s ambitions and risk appetite. Thus, in almost all cases, the insurance broker pays for himself twice over.
At Kröller Capital, we offer customized solutions that fit your business and strengthen your financial position, including credit insurance brokerage. Our team is happy to help you find the best solutions for your credit risks.