What are the options to protect debts?
• Do nothing and hope for the best. This is very much a ‘head in the sand’ approach, but if you have a wide spread of small customers this might be fine. • Take the advice of a business information report before trading. Some reports are good but all look at historical data. There’s no protection or guarantee although some offer the cost of the report back if the buyer fails. Not much comfort though. • Set aside an amount of money as a bad debt reserve that you can call on. However, it may not be enough to cover a large debt, let alone several of them. Also it means you have capital tied up that is not working as hard as it could do. • Take out a credit insurance policy. You get advice on what level it is safe to trade up to with a customer and if the worst should happen and your customer fails, the insurer pays you. Debt collection and / or information may also be included and you may also get credit management, trade and country risk advice. But you need to pro-actively manage the po
