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Insuring your accounts receivables ensures your business will be around tomorrow. Credit insurance can play three significant roles for your company:
Each policy is tailored to the individual needs of the business, so coverage details will vary. In general, a company covers all or a majority of its business, and may choose to cover export, domestic or both types of accounts.
Policyholders are eligible to file a claim when a customer is insolvent or unable to pay the outstanding balance owed. Choose a global company that will be able to cover sales of subsidiaries or sister companies in other countries, as well as provide local features such as risk monitoring and collection services.
If your company has operations in more than one country, Globalliance program offers modular, multi-country policies through the international network. Globalliance policies have standard wording and are adapted to local laws. They can be serviced centrally or with local underwriting and collections, depending on your company's needs.
Debt collection is an all-too-common business challenge. How do you prompt seriously delinquent customers to pay? How do you collect the full balance that you write off? Too many commercial collection agencies operate on a shoestring and put their clients' funds in jeopardy by improperly using trust funds for operating expenses. Any commercial collection agency you use must have a separate client trust account and there should always be sufficient funds in that account to pay all client obligations. The best thing you can do to assure the financial security of the company with which you are doing business is to obtain financial information and obtain bank references.
There are a few imperative qualifications needed when deciding what agency you choose to partner with. These qualifications should be non-negotiable and will aid in minimizing your company's exposure for risk and legal liability. Each state that requires either licensure or registration also requires a bond. The amount of that bond varies from state to state. Those bonds, however, are not always sufficient to protect your company's reputation and assets.
Make sure that any commercial collection agency you use has a $300,000 “umbrella” bond and also make sure that the agency provides you a copy of that bond. Commercial collections agencies are required to be licensed or bonded in a number of states. Before using the services of a commercial collection agency, get adequate assurance from that agency that they are properly licensed and bonded in all of the states that require such licensure and bonding. Too often agencies will try to fly under the radar and solicit clients and collect debts in states in which they have no license. This puts your company at great risk. Now that we have been made aware of the necessary requirements for your choice of third party agency, how do we identify which accounts in our aging are in need of their assistance?
THERE ARE 3 STAGES OF A PAST DUE ACCOUNT
Acting quickly on accounts that show signs of delinquency has several advantages. First, it allows you to take proactive steps to prevent a customer from becoming a debtor. Second, you can accelerate collection efforts before it is too late. For example, acting early might allow you to prevent unnecessary shipments to a delinquent customer. Finally, by being proactive you are empowered to resolve the problem to your satisfaction or to terminate the credit relationship if necessary. Taking any of these actions, however, presupposes that you recognize that a customer may be turning into a debtor. When a bankruptcy notice arrives or you get a disconnected phone number, it is too late.
What are the early warning signs?
Often times there are accounts that do not collect through a commercial 3rd party or did not qualify through underwriting for credit insurance. Now that you have exhausted all other options your company wants to take this vendor to court. How do you know which attorney to use to aid in this process? How do you know this course of action will be cost effective?
Here are some necessary steps in choosing the right attorney or commercial agency with a legal department.
Kristen Raibstein started with Coface in 2007. With over 10 years of finance industry experience, Kristen also has licensing for selling and trading stock, estate planning, and a paralegal degree. She is a native of Louisiana and raises her family of four in a quiet community directly outside of New Orleans.
Published on June 5, 2013 | Categories: Finance
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