The rise of trade delinquencies over the last 12 months is putting small businesses in serious risk of debt defaults.
According to a recent Dun & Bradstreet report, 2011 has experienced an increase of 20 percent in trade delinquencies. Along with the legal costs of debt recovery being beyond the budgets of most Australian small businesses, credit insurance and collections company Atradius warns that owners and managers can no longer afford to ignore the real and serious risk of debt defaults.
“With credit insurance a potentially significant cost for companies, many prefer to trust their own judgement, or take out protection sporadically, leaving themselves open to risk. Comfort is no excuse for complacency, especially with small businesses open to risk,” Artadius ANZ Managing Director David Huey said.
“If only one or two customers fail to pay, the impact on a SME can be disproportionately high as cashflow is severely reduced, and a direct impact is felt immediately. This is why the need for credit protection is essential.”
With this in mind, Atradius has recently introduced ‘Modula First,’ a credit insurance policy covering SME’s against risk non-payment if the buyer becomes insolvent. The policy is based online and prices are based on projected annual turnover and insured maximum liability.
“We have coupled the policy with an online policy management tool to minimise administration time for the policy holder,” Huey said.
Modula First provides up to 90 percent indemnity for potential losses caused by insolvency and contains a reduced paperwork component for time-poor owners and managers.