Protecting Against Payment Risk: Self-Insurance or Credit Insurance?
The growth of your company requires establishing relationships with new customers, expanding business with existing customers, and possibly exploring new markets as
well. But as you do all three, you also expose yourself to risk – there is no assurance that your customers, new and old, will pay their invoices.
To address the challenge, you need to assess your willingness to assume credit risk and then determine whether to protect your company via credit insurance through a strong third party partner or by taking on the risk internally—using the “self-insurance” approach.
Whether it’s elected by conscious choice or by default, self insurance offers flexibility but also comes with real risk and opportunity costs for the business owners. In case of late or unpaid invoices, self-insurance can be costly. It may require considerable effort to recover the money – with very uncertain results as to whether or not the money will ever be
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Content contributed by Euler Hermes.