Credit insurance overdue declaration

There are 2 types of outstanding payments for credit insurers:

bad debts contracted after a bankruptcy proceedings concerning your client,
unpaid without bankruptcy proceedings and due to a dispute, cash problem or dishonesty of the purchaser.

If you have a warranty on your client, you will be compensated quickly (30 days) in the case of a bankruptcy proceedings and between 2 and 6 months if the unpaid is not due to a bankruptcy proceedings.

If the purchaser manage to convince the credit insurer that there is a rightful dispute about your invoices you won’t be compensated any more.

In order to get your compensation, you must report your unpaid within the contractual period agreed with your insurer and have respected each clause in your contract that imply good management of your receivables. Otherwise, you will be considered "neglected creditor"and your insurer will refuse to compensate you

Upon compensation paid by the insurer, he will turn against the debtor and will do the necessary steps in case of bankruptcy proceedings (statement of claim, negotiation with the administrator) and actions of collection in other cases. If he manages to get the full payment of the amount due, it is possible that he pay you back the full amount of your claim.

When reporting the unpaid to the credit insurer you grant a mandate for the actions he will initiate for you to recover your bills.
The credit insurer becomes the creditor and considers your own client as his debtor. He will cancel the guarantees given to other suppliers of your client who may in their turn cancel credit lines previously established in its favor.
Before sending the record to the credit insurer you can warn your client about the risks he faces. He may change his mind and pay your bills.

The use of credit insurance requires a good receivables management and debt collection. If this is not the case, you will have both insurance costs and the cost of credit outstanding to bear. It is for this reason that the establishment of a credit insurance contract is often structuring your company because it forces to adapt your processes to the contractual terms of the credit insurance.

Next: bankruptcy proceedings

Articles on the same topic

Credit Management
What is Credit Management? How to measure its performance in Credit Management with the DSO and the rate of late payments

Credit Notation
Credit scoring tool which evaluates businesses solvency, the credit notation is also an innovative financial analysis tool

Set up the credit limit
Set up the credit limit of your customers with this very innovative tool based on credit assessment

Credit insurance
Credit insurance advantages and different types of credit insurance

Overdue ratio calculation
Overdue % or % current calculation tool. This credit management key performance indicator shows the collection efficiency

Strategy in Credit Management
How to define a strategy for Credit Management to achieve the financial goals of your business?

The letter of credit
Operation mode of the letter of credit which should not be confused with the documentary credit or standby letter of credit

Credit Management policy
Why do we need a credit management procedure to manage credit risks and cash of a business? How to build it, share it and apply it in its company? Template of procedure included.

The documentary credit
What is the documentary credit? What are the advantages and disadvantages of different types of documentary credit? How to implement?

The credit analysis
What is credit analysis and how does it help to prevent the risk of unpaid invoices in the company?

The letter of credit standby
The letter of credit standby advantages and disavantages. The L/C standby is a payment guarantee provided by a bank.

Single risk insurances
What is a single risk insurance? What are its benefits to cover credit risks on export business. How to put it in place?

Credit management organization

Credit risk, who decide
Arbitration between commercial and financial stakes, the sales focus against the company's sustainability, the decision to validate a credit risk is sensitive and strategic. Who should decide?

Credit risk management in My DSO Manager

CFO and credit management

Valuate the cost of credit
How to value the financial cost of the accounts receivable? Business manager will find here a pragmatic and realistic solution that will be helpfull to set utp the credit management strategy

tools to download