80% of small businesses face unpaid debts
As economic pressures intensify, South Africa’s SMEs face a growing threat of unpaid invoices, which can derail even the most robust businesses.
Recent statistics reveal an alarming trend:
- 40% of SME assets are tied up in customer loans, making them vulnerable to late payments or defaults.
- 80% of small businesses report struggles with unpaid debts, which affects their cash flow, limits growth, and heightens operational risks.
- Nearly 25% of small business failures are attributed to unpaid invoices, as cash-strapped clients delay or forgo payments altogether.
Given these statistics, directors and CFOs must recognise the ripple effects of unpaid debts.
As cash flow becomes strained, small businesses often delay payments to suppliers, creating a chain reaction that affects entire industries.
Amid this challenging environment, trade credit insurance (TCI) emerges as a strategic solution to mitigate financial risk.
Understanding trade credit insurance and how it works
Trade credit insurance is a specialised insurance policy designed to protect businesses against losses resulting from unpaid trade debts.
It allows companies to grant payment periods to their customers in South Africa and abroad with confidence.
TCI also protects your invoices against excessive late payment or defaulting by your customers.
In short, when you insure your sales in South Africa or abroad, you protect your cash flow, preserve your margins, optimize the management of your business income, and safeguard your growth.
How Credit Insurance works
How Coface protects SMEs
Coface South Africa has a trade credit insurance solution that is specifically designed for small and medium-sized enterprises (SMEs).
It helps address the concerns you may have about late payers and defaulters by offering a structured solution to safeguard outstanding invoices.
The EasyLiner product acts as a shield for your business, providing coverage for unpaid invoices and helping SMEs maintain their financial health.
EasyLiner includes the following features:
- Prevention – Get information and credit opinions on your buyers and prospects, and secure your business transactions.
- Protection – We protect your business from payment default and late payments.
- Debt collection – Allow us to handle your debt recovery, so you can focus on what matters most to your business.
- Indemnification – We compensate up to 85% of your covered invoices in case of buyer non-payment, locally or abroad.
EasyLiner can direct you towards solvent companies and freeze out bad debters by analysing the environment of your customers in terms of their country, sector, and financial information.
Roger Peixinho, Chief Commercial Officer at Coface South Africa, believes that in today’s tough economic climate, businesses must manage their credit risk to survive and grow.
“In the challenging environment we face today, small businesses are the most vulnerable,” said Peixinho.
“EasyLiner provides an essential safety net, allowing these businesses to protect their income and manage credit risks effectively.”
“By securing their receivables, SMEs can focus on growth and expansion without the constant worry of unpaid invoices,” he said.
What does trade credit insurance cost?
TCI is an investment that not only protects your business, but also provides predictable budget control – which is essential in uncertain times.
For a business with a turnover of R100 million annually, the cost of EasyLiner trade credit insurance is around R120,000 per year (or approximately R10,000 per month, excluding VAT).
Here’s how this translates to real-world impact:
- For an unpaid invoice of R250,000, EasyLiner can cover up to 85% of the amount.
- By filing a claim, you could potentially recover R212,500 – protecting you from a significant financial hit.
- Coface’s debt collection services may help you secure part of the invoice even before indemnification, adding an extra layer of financial recovery.
Protecting your income and driving growth requires more than just basic financial management; it also demands a strategic approach to credit risk management.
Visit Coface South Africa’s website for more information.
Don’t let unpaid invoices hinder your business growth.
With EasyLiner by Coface, gain a competitive edge and secure your business’s financial future.
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