With the current economic uncertainty around COVID-19, measures to close non-essential businesses and enforce social distancing are having a significant impact on all of us.
It’s easy to think about protecting and managing risk around our physical assets like our buildings and inventory, but how good are we at managing and protecting our accounts receivable risk with the credit we extend to customers?
I’m no CPA (so make sure you talk to yours!), but every business extending credit should have strong internal controls, especially during this time. On a very basic level, I think about consistency in invoicing, proper recording of billings, adjustments, deposits, and checks/balances set up for check writing authority and wire transfers. 
Besides limiting the amount of credit you extend to a customer and doing your best to evaluate a customer’s credit risk, another option is to use insurance by transferring the risk to an insurance company. Admittedly, our industry does a poor job of educating businesses about this idea, probably because a bad receivable isn’t the typical claim that we see and training is often inadequate.
Not only can the insurance company take on the credit risk and free up your receivables as collateral, but it can also act as your own backroom credit department. Insurance companies have the financial data to evaluate your customer as a credit risk, insure your entire portfolio, help you bring on new customers, and extend more credit to existing customers.
Premiums generally start at $10,000 and go up from there depending on your aged receivables, history of bad receivables, the payment terms you offer, and financial background of your major customers.
If we can be of any help managing any of your risk during these difficult times, please connect with one of our property & casualty consultants.
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