Free Money!

Free Money!Since cash flow is one of the most important aspects of operating a business, finding extra cash can be a huge benefit. Think of the ways your company could use a lump sum of cash right now.

  • Launch a new marketing campaign
  • Replace an aging piece of important production equipment
  • Hire a new sales rep in a key territory
  • Pay down debt
  • Take it out of the company as personal income

“Ah, but where could I get a pile of cash?” you ask. Do you keep a bad debt reserve in your business? Not an allowance for bad debt, which is an accounting entry, but an actual cash reserve to protect cash flow in the event of a customer payment default.

If you do, let me propose a better alternative: Leverage a small premium in trade credit insurance. This frees your cash to be distributed to the shareholders or reinvested in the business. Free money!

Look at it another way. For every dollar in a bad debt reserve, your company has only one dollar of protection. A credit insurance policy offers a leveraging effect by providing protection of 30 or more times the annual premium paid. In other words, for every dollar paid in premium, you get 30 or more dollars of protection. It’s about that simple. If a customer doesn’t pay, credit insurance steps in and covers the cash flow gap.

In addition, credit insurance can help increase company revenue, streamline operating efficiency, reduce cost and even help improve customer service.

Now, what to do with all that free money…

 

One Response to “ Free Money! ”

  1. April 23, 2013

    I enjoyed your well thought out way of looking how to increase cash flow. Put those reserves to use but protect that gap with the credit insurance. Thank ou for sharing.

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