Did you know that thousands of companies around the world ensure their financial results with Credit Insurance ? This type of insurance is a protection against default on installment sales, which indemnifies the insured company (creditor) that does not receive the credits granted to its customers (debtors).
Hiring Credit Insurance can bring several benefits to your company, but two stand out for CEOs:
1. Good Corporate Governance
The old and well-known Credit Insurance is recognized by audits as an effective “tool” to reduce this effect on results and avoid the need to increase provisions for doubtful accounts on the balance sheet.
For a modest insurance premium, this provision can be reduced and, in this way, also reduce the impact on the companies' operating results. Provisions for this type of debtor are not deductible expenses for income tax purposes, other than the insurance premium, which is deductible.
2. Achieve projected goals and results
Currently, the Brazilian macro economy is extremely volatile and it is difficult to make predictions. Customers and suppliers are under the same pressure. Some of these companies will not be able to resist this uncertainty and will file for bankruptcy and/or bankruptcy next year. It's not always easy for the CEO and his teams to predict that their customers are in trouble.
Historically, one of the biggest causes for a company to enter judicial reorganization and/or bankruptcy is precisely due to an important and relevant customer becoming insolvent, and not honoring its payments to the company.
In these cases , Credit Insurance protects one of the largest and most important assets on the balance sheet, the “accounts receivable”.
CEO's usually do not give due attention and protection to “accounts receivable” because they do not believe that this asset is exposed to risk. They trust that their teams will anticipate these types of risks and do not buy adequate insurance protection to guarantee their clients' insolvency.
They take out factory fire insurance, despite the low frequency of claims, but do not take out “accounts receivable” insurance. Both risks have the same “severity” effect on the company's bottom line, and both risks, without insurance, can bankrupt the company.
Do you want how much additional revenue would be needed by your company to replace the profit in case of default? Use our profit recovery simulator and learn how to.
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