Collaborative effort can avoid unexpected bad debt losses.(REQUIRED READING)(non-payment of a trade debt)

Even in today's strengthening economy, losses attributed to non-payment of a trade debt or bankruptcy can occur. I believe it's better to avoid them through proactive intelligence, than to simply react to the consequences after the fact. That's where trade credit insurance comes in--it's more than just a means to indemnify losses incurred from a trade debt default. The ultimate goat is to help the insured avert catastrophic losses and grow the business profitably. The key is having the right information and proper analysis to make informed credit decisions at the outset, and then monitor the risk effectively after shipment.

The process of insuring a company's accounts receivable involves understanding the company's trade sector, risk philosophy, business strategy, financial health, funding requirements and internal credit management expertise. Trade credit insurance does not substitute for prudent, thoughtful credit management. Sound credit management practices must be in place before a policy is bound.

With other types of business insurance, the policy is often purchased and filed in the desk drawer until the following years renewal Trade credit insurance is different. Building a strong relationship between the policyholders credit management department and the trade credit insurer is the surest way to make certain that the policyholder derives maximum benefit from their investment. A strong rapport between the two parties allows the trade credit insurance policy to be a living, breathing document that is as dynamic and unique as the business it is protecting.

To maintain and maximize the collaborative effort, it is important for policyholders to have a good understanding of what happens "behind the scenes." The best trade credit insurers will invest heavily in developing proprietary credit and financial information. They will employ risk analysts, as well as industry- and country-based underwriters, in many geographic locations, to have a physical presence dose to their policyholders' buyers. This dose surveillance leads to higher acceptance rates, generating more sales and lower losses. In addition, they are part of a network that monitors the creditworthiness of countries around the globe, capturing and analyzing payment information about a policyholder's buyers to identify early signs of financial trouble.

Risk analysts research, gather, and evaluate information about individual buyers and use that data to prepare a comprehensive assessment of the account. The risk underwriters complete the review process and approve or define coverage for the policyholder. Having access to this information allows companies to ...