For small businesses in particular, late payments can have extreme negative impacts. Recent figures from BACS (electronic payment services) have revealed that 60% of UK businesses are affected by late payments. Late payments have more of an effect than ever before, since businesses are struggling to obtain credit from banks and other lenders in order to help keep themselves afloat during the interim. This makes it even more essential for small businesses especially to protect themselves with credit insurance.
BACS found that the most common reason (40%) for late payments was problems with a customer’s own cash flow. This then creates a knock-on effect on every business within that chain, and is a significant contributor to the large numbers of businesses having to cease trading.
Business credit insurance is extremely important in combating this problem, as it can help businesses to recover the money owed to them and break the cycle of late payments and insolvency. Not just for small businesses, companies of all sizes use credit insurance to protect themselves against late or non-payments, as well as to provide information on their customers through credit reports.
Although credit insurance, as with any other type of insurance, costs money, this is a payment worth making when faced with the alternative of your company going out of business. Even if you manage to keep trading, the chances are that you will lose a lot of custom or have to downsize because of the interruption to your cash flow. Credit insurance helps you to avoid many of these problems.