What if trade credit insurance was much more than just a safety net? Beyond protecting your company against unpaid invoices, trade credit insurance can help you increase sales, reduce financing costs and improve your profitability in the long term. Discover how trade credit insurance can become a valuable financial management tool and have a positive impact on your balance sheet and income statement.
Unpaid invoices: the hidden costs weakening your cash flow
As the leading source of financing in the economy (far ahead of bank or financial credit), inter-company credit automatically puts your company at risk. The main one is the unpaid invoice risk: when you grant your partners a payment delay, you expose your company to the risk of non-payment.
In this case, your cash flow might be more seriously affected than expected by the real cost of your unpaid invoices.
The additional revenue you will need to generate to cover this unpaid invoice far exceeds the single invoice amount and also depends on your profit margin.
Nowadays, around 80% of companies face late payments, and 25% of company bankruptcies are linked to unpaid invoices. Trade risk mitigation solutions, such as trade credit insurance, provide upstream protection for your company's finances against unpaid debts. By covering your invoices against late payments or, in the worst case, total non-payment, trade credit insurance allows you to trade with confidence with your partners.
And that's not all: it's also an efficient lever for maximising your financial performance. Did you know that your company can achieve immediate financial benefits, such as increasing your sales and reducing your financing costs, all with a positive impact on your income statement and balance sheet?
Optimise your income statement
1- Boost your sales
Trade credit insurance is a way to stimulate your company's growth: it secures the granting of credit and expands your network of business partners. This allows you to increase your turnover more quickly by:
- signing new contracts,
- obtaining larger orders
- offering more flexible payment terms to your new clients.
In addition, thanks to economic and geopolitical risk insights, you have a much more solid foundation for breaking into new markets without exposing yourself to excessive financial risks.
2- Reduce operating costs
In addition to minimising losses on bad debts and limiting your financial reserves, trade credit insurance also reduces overheads through the outsourcing of credit management and Debt Collection, allowing you to reduce and reallocate the time and resources spent on legal proceedings and collection procedures.
3- Decrease interest costs
Banks and financial institutions consider credit-insured receivables to be less risky. This allows you to improve your company's credit profile and stabilise cash flow and working capital requirements, reducing both the need for short-term financing and the cost of borrowing.
For example: when you apply for an asset-backed loan, if you are credit insured, the lender will generally include export receivables in its loan base. This means you can access a larger line of credit with more favourable rates.
4- Improve your net income
Trade Credit Insurance ensures that you are able to analyse the financial health of your prospects and clients at any time. This gives you real-time visibility to protect your income against the risk of insolvency of your business partners.
Trade credit insurance also improves your cash flow and net income, particularly through its unpaid invoice collection services.
By driving sales, reducing costs and limiting risks, trade credit insurance plays a key role in optimising profitability and strengthening your company's financial results.
Improve your balance sheet
5 – Strengthen your assets
Trade credit insurance consolidates your entire asset base by improving its quality and reliability, in particular current assets. Overall, your company benefits from greater financial stability and becomes more attractive to investors and creditors.
6 – Limit your current liabilities
By strengthening the stability and predictability of cash flows, particularly future cash receipts, trade credit insurance reduces the need for short-term financing (which is often costly and restrictive) to cover current expenses.
7 - Improve your shareholders equity and total liabilities
Trade credit insurance actively contributes to improving your company's balance sheet by acting on several key financial levers. Firstly, it secures client payments and prevents liquidity issues. This regularity in cash flow reduces pressure on short-term liabilities.
On the other hand, by reducing bad debt risk, trade credit insurance safeguards the company's current assets. Fewer losses on your receivables means better asset quality, which automatically strengthens your balance sheet. It also limits provisions for impairment, which usually weigh on results.
Why opt for Coface's trade credit insurance
At Coface, we’ve been managing trade credit risk for nearly 80 years to help companies grow and navigate an uncertain and volatile environment.
Our trade risk management solutions empower companies to make the right decisions and trade smarter. Every day, we leverage our unique expertise and cutting-edge technologies to serve 100,000 clients in nearly 200 markets.
If you are looking to secure your growth and strengthen your financial stability, here are some reasons to choose Coface trade insurance:
- Preserve your company's margins by limiting the financial impact of unpaid invoices.
- Guarantee the reliability of your customer portfolio
- Manage your credit and hedging operations
- Secure your projects and gain easier access to financing - and on more favourable terms!
- Optimise your balance sheets and income statements
- Cover your receivables and protect your cash flow
Contact our experts now to find the right solution for your company.
