The western world has not had an easy couple of years at all. It has had a pandemic; it has had Brexit to deal with and now there’s a war going on.
Businesses have been affected in many different ways and have been trying to recover ever since. During the pandemic, many businesses had help from the government in the form of loans, grants and furlough schemes which were the lifeline for many businesses.
Although this has helped, it has also just postponed the inevitable. Now there is no funding available, and the recovering market is tough, many more businesses have closed down.
For the resilient businesses lucky enough to have survived through all this, businesses are now looking for alternative options for getting back to where they were before the pandemic and growing their business.
Challenges Businesses Can Face
Growing a business expeditiously in a recovering market is hard for many reasons as there are many considerations to have. An example of this would be a business growing too fast can sometimes do more harm than good as an overload in work may result in you not being able to cope with the influx. You also may not have the funds or resources causing stock and cash flow issues resulting in insolvency. Once these businesses have failed, they will quickly be turning to make a claim on their trade credit insurance policy.
Now more businesses are needing more help than ever to future-proof their enterprise, it is only normal for brokers to be much more critical of claims making it essential to have everything in place to minimise the chance of your claim being rejected or reduced. Brokers are now looking further into failures in compliance with policy terms and conditions.
In this article, we will go through some of the helpful tips you will need to prevent rejected or reduced credit insurance.
What Is Trade Credit Insurance?
Trade credit insurance is a policy for businesses that are owed money from their customers including bad debtors and businesses that have become insolvent. Credit insurance can also help businesses in a different way, credit insurance can help businesses have an extra lifeline which makes accessing funding that little bit easier at a competitive rate.
How Can I Prevent Rejected or Reduced Credit Insurance?
There are a few ways that can help prevent a rejected credit insurance policy. If you have never made a trade credit insurance claim before, it is best to do thorough research before going ahead. Speaking to a trade credit insurance broker can help answer your questions about your industry specifics.
1. Show Documentation For Claim
Credit insurance claims are rejected a lot and even more times they are reduced. This is especially the case when you can’t provide the relevant documentation the insurer needs for evidence. This evidence is to show that you are meeting the policy terms and conditions. An example of this would be if a company couldn’t provide their delivery notes. If a business fails to show documented transactions, the claim can be thrown out.
Businesses can easily avoid this from happening to them by having all their documents organised and put away safely. By doing this, you won’t have this problem and your claim will go through. It is essential that all transactions and anything else you feel will be necessary are kept safe. To document in 2022 is much easier as everything is digital meaning that everything can be stored on the computer.
2. Ensure Credit Limits Are in Place
Agreeing on a credit limit before committing to a deal is crucial if you are after a full claim. This is especially the case for even a quick deal. Permitting debt to build up before you have agreed on a credit limit can be critical for a business. Due to this being a disastrous situation, it can put a lot of pressure on affordability which can easily be avoided.
This, unfortunately, happens all too often, an example of this would be for a business that is trying to solidify a quick deal, so they accept the agreement without agreeing to a credit limit. If your customer can’t pay you or they have become insolvent, this could be disastrous for you. Instead, ensure a credit limit is in place before any deals are accepted.
The reason why this is disastrous and can cause insolvency is that the credit limit will only apply to the credit limit after the credit limit is accepted meaning that the debt accrued before this limit is not covered. This can quickly result in a business becoming insolvent.
3. Be Aware Of Scams
When times get hard, many people, unfortunately, try their efforts in scamming people for their own benefit. Fraudulent activity becomes extremely popular in a recovering market. If you are subject to being scammed, your credit insurance policy doesn’t cover this.
There are many types of fraud such as phishing, but the most popular form is buyer impersonation. With fraud not being covered by credit insurance, it is up to you as a business to do your due diligence and do relevant checks on your customers to see if they are who they say they are. This in turn will help protect your policy and business.
There is a range of different ways in which you can prevent a reduced or rejected trade credit insurance policy. If you are needing more help to determine the best way to go ahead with your policy, you can speak to a credit insurance broker for all the information you need.