Protecting your business against ‘bad debt’

As a business owner, you work hard to establish effective business operations, ensuring that you are able to protect your employees, stakeholders and, of course, your livelihood.

But when delayed or non-payments, at the fault of your customers or clients, threaten to negatively impact your cash flow, this can pose a real risk to your business in more ways than one.

Whether it’s just a couple of large invoices or a period of delayed payments from a number of your clients, it might not be long before your business is facing thousands of pounds worth of debt, through no fault of your own.

An effective way of ensuring that your business is protected from non-payments is Bad Debt Protection.

What is bad debt protection?

Bad debt has the power to have a detrimental effect on any business.

But for SMEs who operate on smaller margins, just one non-payment can have a huge impact on business growth and, of course, cash flow.

And it was recently revealed that 27% of UK SMEs had “written off bad debt in the preceding 12 months”. 

That equates to a staggering 1.4 million small businesses who are suffering at the hands of their customers or clients, and a total of £5.8 billion of bad debt written off nationwide.

With the transport and construction sectors being named as the worst-affected, the study highlights just how costly of an issue non-payments can make to a small business, both in terms of time and money.

And this is where ‘bad debt protection’ can safeguard a business against the risk of late or non-payment by a client or customer.

Bad debt protection is where a third-party company, such as Peak Cashflow, will insure your business and cover you for up to 90% of the net value of an invoice if a customer fails to pay.

This cover is only typically available for invoices where the customer has a good credit rating, as for those with a poor credit rating equate to more risk for providers.

Undisputed invoices that aren’t paid within 120 days will also be paid under protracted default.

Bad debt protection provides much-needed reassurance for SMEs, ensuring that they can keep up with business as usual, knowing that they’ll receive their cash at the end of the payment period.

It’s also effective in safeguarding your business against a customer who has become insolvent and has no funds to be able to pay you for your services.

What are the benefits of bad debt protection?

The main benefit of bad debt protection cover is that it offers flexibility and reassurance for a business.

It gives businesses control over their cash flow, where before a customer held the power – even when credit control measures were firmly put in place.

As 90% of the net value of an invoice is covered under bad debt protection, even following a customer’s insolvency or protracted default, any business owner who agrees to the cover can continue business operations as usual.

This type of protection also provides the flexibility of selecting individual customers to cover, tailoring the cover to suit your business needs.

And by working with a team of experts, such as Peak Cashflow, you can ensure you have a direct line to professionals in the field who can advise you when you need it most.

With 40% of SMEs said to have no idea of the full value of the debt being owed to them from their customers, this just highlights how valuable bad debt protection cover is.

By investing in bad debt protection, a business can ensure they are in the best position to grow and thrive. In this way, they can also be paid the money they are entitled to.

Discuss our bad debt protection cover with a member of the Peak Cashflow team, or discover how our invoice factoring and discounting services work hand in hand by contacting us on 0121 236 7575 or send us an email at info@peakcashflow.co.uk.