Debtors Management

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One of the largest assets in any organisation, large or small, is the Debtors Ledger. Therefore a large emphasis needs to be placed on effective credit management, policy and control.

From time to time, there will be issues concerning debtors who fail to pay within the trading terms. Even worse they may fail to pay at all. Very often however these situations are recognised too late. The question is, how do you safeguard your Debtors Ledger against potential problems?

Credit Insurance is a means of providing protection against unforeseen risks. A successful Credit Insurance claim will inject cash back into the business when a debt goes bad.

Credit Insurance policies can be tailored to meet the individual needs of a business. Every business has specific risks and structures, and requires different limits of cover. Policies are flexible and can be maintained at a planned tax deductible rate.

However, it is important to note that a Credit Insurance policy is not a substitute for sound credit management. It is essential that every business has good Credit Management practices and the people in place to implement these policies. Credit Insurance should be thought of as a last resort, a safeguard against market variables and influences that are beyond the control of credit managers, not the first line of defence.

In summary credit insurance can-

  • inject liquid funds back into the business in the event of a debt going bad
  • be maintained at a planned Tax deductible cost
  • be a source of security to offer bankers when looking for further finance
  • protect shareholders assets
  • be flexible and diverse for different types of business – many policies are tailor made to suit the risks and structures of individual businesses
  • cover local, interstate as well as international trade debtors

Macks Advisory is a firm that practices exclusively in the areas of insolvency and business reconstruction and members with queries are invited to contact Peter Macks at Macks Advisory on 08 8231 3323 or by email to [email protected]