Don't let bad debts put your business at risk

Freight operators face three major risks in providing their services. The first two relate to loss of or damage to cargo as well as to liabilities to other parties (customs for example) from the movement of cargo across borders. These risks are usually catered for under a cargo policy and by the freight operator’s liability policy. The third major risk is a pure financial exposure which results from a customer’s inability to pay for the services rendered. As Jason Freeman, director of Eikos Risk Applications, explains: “It is imperative that freight forwarders recognise the exposure of these three identified customer-facing areas of risk and manage them holistically.” The key risks covered by a trade credit insurance policy are where a buyer is either put into liquidation or has been placed in business rescue and is incapable of settling their outstanding debt. Cover can also be extended to include protracted default which protects failure of a buyer to pay the contractual debt within a pre-defined period. For many companies, trade credit insurance is an essential business tool, giving them the confidence to expand their business without the fear of non-payment from their existing clients. “When you implement a trade credit insurance programme with the guidance of your insurance broker, you are not just buying coverage on your debtor’s book, you are partnering with a company in credit risk management who is there to help you avoid credit losses before they occur, and to back you up when they do,” Freeman explained. “With a good credit insurance programme in place, companies have the security to trade and build their businesses, knowing that they are covered.” Every year, hundreds of South African companies become insolvent – ensure you’re not left exposed.