IS MY COMPANY AT RISK FOR ACCOUNTS RECEIVABLE LOSSES?
Accounts Receivable losses are driven primarily by Customer Bankruptcies and Insolvencies, which are inevitable and on the rise both in the United States and around the world. In 2005, 39,201 companies in the United States alone filed for bankruptcy protection, leaving many suppliers as general unsecured creditors in bankruptcy. This rate of business failures is up 14.2% from the 34,317 U.S. companies that filed for bankruptcy protection just the year before 2004 (Source: Administrative Office of the U.S. Courts). Can your company afford to be caught as a general unsecured creditor in the event of bankruptcy of one or more of your customers worldwide?
Large size and strong brand names are no protection against insolvency in the United States or anywhere worldwide. The following former U.S. corporate giants all sought bankruptcy protection, which caused significant losses to their suppliers who had not protected their A/R with Trade Credit Insurance: Kmart, Enron, WorldCom, Chiquita Brands, Polaroid, Adelphia, Conseco, Rand McNally, US Air, Bethlehem Steel, Armstrong, UAL, and Burlington to name a few.
WHAT CAUSES BANKRUPTCIES AND PROTRACTED DEFAULT (SLOW PAYMENT) BEHAVIOR?
The following are just some of the reasons why your Customers can experience cash flow deficiencies that cause slow payment behavior and possible subsequent bankruptcies. These situations are unpredictable and often silent until it is too late to correct the problems. Even with the best internal audit and external credit management practices in place, the following can occur and can jeopardize your company's ability to collect your Commercial Accounts Receivable on a timely basis:
Management Deficiencies/Incompetence (Bad Business Decisions)
Internal Fraud
Product Liability Lawsuits
Competition/Loss of Market
Regulatory Changes - Domestic and International
Foreign Political Upheaval
Legal Maneuvering (mere 'threat' of insolvency and bankruptcy filings)
TRADE CREDIT INSURANCE CAN PROTECT YOUR COMPANY'S COMMERCIAL ACCOUNTS RECEIVABLE FROM LOSSES CAUSED BY THE ABOVE AND OTHER THREATS TO YOUR CUSTOMERS' CASH FLOWS.
