Search
 

The A/R Risk Balancing Act

How external risk management tools, such as trade credit insurance, can help companies extend more credit to more customers.

X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

When a company is growing, finance executives must continuously balance the benefits of doing new business with the associated risks. On average, one in every 10 invoices becomes delinquent. So each time a business grants credit to a customer, it is taking a chance that the debt will not be paid. Obviously, this creates risks for the business’s cash flow and profitability, since one large unpaid invoice may have the potential to blow the bottom line, halt growth, or even trigger insolvency.

Representing up to 40 percent of the typical company’s balance sheet, accounts receivable (A/R) are naturally both a vital and vulnerable component of a healthy business. Losses attributed to nonpayment of a trade debt are a regular occurrence, even as the United States continues its gradual economic recovery. In 2013 alone, nearly 40,000 North American companies declared bankruptcy, leaving their creditors holding the bag.

Recommended Stories

Companies Spent Their Summer Vacation Selling Bonds

Brian Chappatta |

Although August was supposed to be slow, prudent finance teams have seen this month's surpisingly low rates as a reason to delay summer vacations and issue debt instead.

No More Red, Yellow, and Green

Nicola Sanna |

How to quantify cybersecurity benefits and manage cyber risks like other operational risks.

Treasury & Risk

Join Treasury & Risk

Don’t miss crucial treasury and finance news along with in-depth analysis and insights you need to make informed treasury decisions. Join Treasury & Risk now!

  • Free unlimited access to Treasury & Risk including case studies with corporate innovators, informative newsletters, educational webcasts, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM publications including PropertyCasualty360.com and Law.com.

Already have an account? Sign In Now
Join Treasury & Risk

Copyright © 2019 ALM Media Properties, LLC. All Rights Reserved.