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How to Get Paid All You’re Owed

Has one of your retailer buyers gone bankrupt? Credit insurance can help salvage some of your loss, but there’s a better option.

“Better to have it and not need it than to need it and not have it.” This is your rationale for grabbing an umbrella even on a sunny day before you step out to go to work in the morning, for throwing a portable battery in your bag even when your smartphone is 100 percent charged, and for keeping extra sets of house and car keys in your office desk. It’s also the motto of every insurance salesperson who wore you down so that eventually you bought their wares. “Hey,” they quip, “you never know!”

As a Consumer Electronics (CE) vendor, however, you do know. You know that, after chasing a recalcitrant retailer incessantly, you’re never going to see the money from that order you shipped to them six months ago. It could be that usually reliable mom-and-pop store that simply over extended itself. It could be that big national department store that just filed Chapter 11. With the challenges facing the retail environment these days, no business is risk free.

With today’s shrinking margins and increasing pressure to produce new products, being as little as five percent short of your expected revenues can really blow a hole in your budget, leave you scrambling to meet your business’s monthly expenses, or prevent you from investing in new product trends.

To protect against these non-payment inevitabilities, many CE vendors buy “credit insurance.” In fact, according to a recent TWICE survey, 32 percent of CE vendors have purchased this insurance and another 37 percent have considered it.

But just as with any other kind of insurance, you have to pay upfront premiums and meet deductibles—and you only recover 85–90 percent of what you’re owed. In addition, because the insurance company will make you jump through all the usual bureaucratic, legal, and paperwork hoops, there’s no telling when the insurance check will arrive.

But there’s no reason why you shouldn’t get  what your receivables are worth.

A Better Way to Protect Your Receivables

Consider an alternative: you can get paid without hassle, in a shorter time frame, and receive the invoice amount less a small commission with a product called “credit protection.”

Credit protection has several advantages over most credit insurance products on the market. First, there is no upfront premium—you pay as you go based on the orders submitted for protection. Second, there is no deductible or co-pay—you get paid the invoice amount less a small commission (instead of the 85–90 percent you’d receive with insurance). Finally, with credit protection you will generally get paid faster—usually between 90 and 120 days past due. 

Accounts receivable (AR) management companies that offer credit protection, such as CIT, have decades of experience and credit knowledge about big and small retailers and the overall retail environment. And instead of having to call an insurance company’s impersonal 800 number to get assistance, clients of a company like CIT have access to a dedicated client service officer who can discuss credit issues and provide information on prospective new customers.

The bottom line? Credit protection gives you that “you-know-you’ll-need-it-so-you’re-glad-you-have-it” assurance against potential losses. And when you need it, you’re covered for what you’re owed.

Click here to see more information on credit protection for consumer electronics vendors on the CE Financial Strategies Center

If you would like to learn more about credit protection, please contact me at [email protected] +1 212 461 5299.

Joel is a business development officer at CIT Commercial Services. With over 18 years’ experience, Joel has structured many financing arrangements for companies in the consumer products space, including consumer electronics, apparel, textiles, and housewares. Joel has a deep understanding of the retail supply chain, as well as the retailers to whom his clients sell.