by Gianluca Errico MONACO. Credit insurance protects the company against commercial and political risks that are beyond your control. It improves the quality of your bottom line and helps you to grow profitably while minimizing the risk of sudden or unexpected customer insolvency. Credit insurance gives you the confidence to extend credit to new customers, and improve access to finance, often at more competitive prices. The trade credit insurance is for short-term trade receivables – ie those due within 12 months. Credit insurance protects your business against the failure of your customer and pay their debts to commercial credit to you, that may arise due to insolvency or failure to pay within the agreed terms and conditions ( ‘default protracted’ ). The network of Euler Hermes Risk Office monitors financial performance and the well-being of your customers, every one of these customers ‘degree’ that reflects the health of their business and the way they conduct business. Based on this risk assessment, in each of your ‘customers’ specific credit limit is then granted up to which the insured, can operate and be able to claim if something does not go your way. This limit may be revised upwards or downwards, according to new information. Throughout the duration of the policy, EH informs of any changes that could affect the financial health of your customers and their ability to pay for goods or services you have delivered. In the event that the buyer can not or will not pay, you will be insured and safe up to the limit of your policy. Thanks to EH you can also manage the collection of the debt for you, if necessary. The online services are run by trade receivables safely, with reporting and risk management in real time, minimizing risks and maximising opportunities.
QUESTION: Why should a company take out the B2B credit insurance?
ANSWER: Trade receivables are one of the main balance sheet asset of a company. With credit insurance, you can protect your current and future cash flow, as well as profits, and free up resources to focus more on the ‘added value’ of your activities, including new business.
Q. What are the key issues the credit insurance?
A. Basically, the credit insurance improves the quality of the bottom line of a company through a complete protection against the risk of default, improves customer relations, banking relations and access to credit, provides greater confidence in pursue business opportunities. It also provides an excellent insight into the company’s risk to the customer through credit information without equal.
Q. Please give some examples of credit insurance.
A. If the profit margin of your company is 5%, and one of your buyers has defaulted on a debt of € 100,000, then you will have to produce additional sales worth € 2 million to compensate for the loss of profits. Missing payments weaken your company and reduce its investment capacity. A credit insurance policy helps you manage your trade and mitigate losses in the event of non-payment. EH adapts the credit insurance solutions for size, industry and business, and according to the needs of your company.
Q. There are several solutions to credit insurance for small and medium-sized enterprises, for large and multinational corporations?
A. Euler Hermes is the worldwide leader in providing trade credit insurance, locally and globally. Our credit insurance enables companies of any size to trade with confidence locally or abroad. We help companies find the right customers to do business and make sure that the bills will be paid.
Q. What exactly is debt collection?
A. The global average DSO (Days Sales Outstanding) has remained stable since 2010. However, the time needed to collect the receivables continues to be very uneven among companies, countries and sectors. Many companies have to wait more than 90 days to be paid by their clients. Overdue bills can heavily influence the day to day management and financial stability of enterprises. That’s why professional accounting of receivables management is vital to safeguard solvency. For many companies, especially for Small-Medium, credit management can be a great challenge and critical of its core business. Companies should focus only on how to improve relationships with customers, they should not chase them to get paid. That’s where the ‘Euler Hermes Team can help.
Q. What is Bonding?
A. Bonding is a strong internal bond that gives the business all securities to ensure that it can perform its contractual obligations. It provides an essential safeguard for businesses and a flexible alternative to bank bonding to safeguard your liquidity. Releases additional liquidity to finance the development of your business and the necessary security to the lasting business relationships. With over 90 years of experience in the global Bonding, EH is one of the best experts in the world in the bonding market.
Q. And with regard to the multinationals?
R. All over the world EH secures loans using credit insurance solutions globally and tailored. We are the world’s leading provider of commercial insurance solutions. With over 100 years of experience, we have gained the trust of our customers around the world. We use our know-how, our desire to be helpful and all our energy to help you achieve new goals and juggling in the economic climate changing. EH provides the right solution for multinational companies with business units in two or more countries and a turnover of over € 500 million. EH offers hedging transactions, solutions in the area of political risk, medium-term poliizze (up to 8 years), structured offers or individual transactions.
Q. Please explain the XOL (Excess of loss loss-excess).
A. XOL is designed for multinationals with strong and mature credit management practices, can absorb a greater level of risk share.
More info: www.heulerhermes.com and from Monaco area: www.heulerhermes.fr Euler Hermes France – 1, Place des Saisons 92048 Paris la Défence- Tel +33 1 84 11 50 5