Virtually all commercial transactions between businesses (including between sole traders and self-employed professionals) are carried out through credit sales. In other words, through transactions in which the buyer acquires the goods or services it needs and undertakes to pay the invoice at a future date.
This practice is effective in facilitating and encouraging sales. However, it clearly brings uncertainty as to whether invoices will be paid, so it is vitally important to manage this situation properly so that it does not affect the smooth running of the business or put its survival at risk.
Late payment between businesses is a highly relevant issue on which legislation has been passed. Maximum periods for collecting invoices have been set, shorter than those commonly used before.
In practice, these rules are not complied with, as shown by recent figures from the ‘Late Payment Observatory’ by Cepyme (the Spanish Confederation of SMEs), which put payment delays at up to 20 days beyond the legal deadlines.
This regulation is not enough to reduce the risk of unpaid invoices, and those most affected by this situation are the self-employed and small and medium-sized enterprises.
A reality that, in the first four months of 2024, saw the number of business insolvencies in Spain rise by 23.7% compared with the same period in 2023 (according to a Solunion report).
Faced with this situation, trade credit insurance is, without doubt, the best and most efficient way to reduce this risk of non-payment, because:
- It prevents risk through credit information on customers' solvency, which helps when granting them credit. It also makes it possible to finance invoices.
- It handles the claiming and recovery of unpaid invoices.
- It makes good the losses caused by an unpaid invoice, paying compensation of up to 95% of its value.
Every company has to manage its commercial relationship with its customers. Trade credit insurance is the best option: as well as professionalising the company's internal operations, it offers additional advantages over ‘self-insurance’:
- It is a tool for market prospecting and customer selection.
- It helps the policyholder make commercial decisions and acts as a deterrent against potential defaulting customers.
- It protects the company's income statement through compensation.
- It reduces the costs of credit management and collecting payment from customers.
- It makes negotiations with banks easier, as the insurance gives the company stability and minimises the risk the bank may take on.
- Solutions tailored to each client.
Trade credit insurance provides the financial stability your company needs to keep growing. You will be able to make business decisions with greater confidence and, above all, protect your turnover to secure the long-term success of your business.
Please do not hesitate to contact us with any questions you may have.
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