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Bad debt: protect your business – and survive

The limited availability of credit and the pressures on cash flow that all businesses are facing can have a domino effect, so vigilance is paramount. Here, Trevor Byrne of Coface tells you some of the things you need to do, whether trading domestically or exporting, to safeguard your cash flow.

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The limited availability of credit and the pressures on cash flow that all businesses are facing can have a domino effect, so vigilance is paramount. Here, Trevor Byrne of Coface tells you some of the things you need to do, whether trading domestically or exporting, to safeguard your cash flow. Consider credit insurance to protect against potential bad debt and insolvency of your clients at home or abroad. Be alert for indications that your customers might be experiencing financial problems. Look out for changes in payment patterns – customers who have previously been prompt payers falling behind and customers who avoid taking your calls when bills are due. If you suspect a customer is having financial difficulties, credit-check them and re-assess your relationship. Don't let overdue accounts run on: continuing to supply a customer who is slowing down on payments only shifts more of the problem onto you. Take action on overdue accounts now – use a specialist debt collector. Ensure that thorough credit checks are carried out on any new accounts before you start trading with them. Beware customers who switch to a new supplier because they have reached their credit limit with existing ones. Think about alternative ways of increasing your cash flow. Receivables finance can advance you up to 90% of the value of your invoices immediately. Free resources Country and sector rating analysis helps companies trading internationally to secure their transactions. This service is one of Coface's key areas of expertise and is available free of charge on the Country Risk and Economic Research area of www.cofaceuk.com. A Country Ratings map is now available within this section, showing ratings across 165 countries around the world. Also available free online is a credit management health check, which will provide an indication of how safely you are trading on credit terms. About the author Trevor Byrne is marketing manager of Coface.

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