Secure your receivables

Bad debts and late payments are the cause of one in four business failures and are responsible for the financial difficulties of countless numbers.

It is therefore necessary to secure its receivables either by demonstrating the financial and behavioral quality of its buyers and / or by providing security solutions.

These can either be obtained through commercial negotiation (for example obtaining a deposit or a bank guarantee) or from third parties.

When securing sales?

After evaluating the creditworthiness of your customer, first need is to set up the credit limit and the payment terms in order to ensure that the credit and payment conditions allowed to your customer is consistent with its financial capacities.

The final payment of your invoices is often determined by what has been approved ahead during the trade negotiations.
A good management of trade receivables requires usually anticipation and resolution of potential problems even before delivery and invoicing.

What are the steps to secure the business?

There are many different types of means to ensure the subsequent payment of receivable.

The first step is to define what outstanding amount is acceptable for a given customer and to optimize the payment conditions:

• Set a credit limit in line with the financial capacity of your client,
• Define the payment term(down payments, payment delay) to achieve your sales without exceeding the credit limit.
• Establish guarantees (from banks, credit insurance ... etc) and / or contractual clauses that reduce or cancel the consequences for your company of an unpaid invoice.

Secure its receivables is linked to several objectives

• Help to establish business relationships with poor creditworthiness customers without exposing your company to a risk of unpaid,
• Secure all your receivables accounts in order to avoid any unpleasant surprise,
• Avoid late payments,
• Discount your accounts receivables in order to get cash as soon as invoices are issued.

These solutions can be divided into two categories.

• The specific ones: those that you develop for a client or a particular business.

  • Payment in advance
  • Delegation of payment
  • Bank guarantees
  • Parent company guarantee
  • Documentary credit of Letter of Credit Standby

• Generalist ones: those involving some or all of your clients.

  • Credit insurance
  • Factoring
  • Contractual clauses

Thus, a bank guarantee will be the best solution in some cases when payment in advance or a delegation of payment will be the best solution in others. It is of course possible to combine different tools to reduce the risk. For example, getting a 30% down payment associated with a guarantee from a credit insurer and contractual conditions protecting your business until all invoices are paid in full.