protect your middle market firm if a customer goes out of business

How To Protect Your Middle Market Firm If A Customer Goes Out Of Business

In Customer Resources by Brandt A. HandleyLeave a Comment

Every type of business inherently has some levels of risk attached. Moreover, there are costs to doing business you can’t escape. However, not getting paid for products or services you’ve already delivered shouldn’t be one of the risks. While it may seem inevitable at some point, there are a few ways to cover or protect your organization. Here are thoughts on how to protect your Middle Market firm if a customer goes out of business.

Should Your Middle Market Firm Use Credit Insurance Or Credit Protection?

Credit insurance can help recover some losses if a customer fails to pay, but it certainly isn’t the only option. Credit Protection could be the right choice for your Middle Market company depending on your situation. And, depending on how much risk you feel your firm is taking on.
Insurance means paying premiums throughout the lifetime of your coverage, whether you use it or not. So, for some companies, the price tag will turn them away. And, you won’t recover all you are owed, somewhere between 80-90% is common. However, if you have a major client default on a huge bill paying those premiums could potentially be small compared to the costs of trying to recoup your losses. Moreover, going it alone could mean you’d recover even less back.

If your Middle Market firm mostly works with large, well-established clients and feels the risk is fairly small, Credit Protection may be the middle ground. Since you pay based on orders submitted for protection and there is typically no deductible or co-pay, it can be a cost-effective way to use services when you need it. Usually, your Middle Market company would see a faster turnaround than through insurance and will get paid the invoice amount minus the commission for the services.

Either option is a sound way to help salvage a bad situation. However, both come with some side effects to be aware of, and your leadership and finance team should be able to best decide if either makes better sense.

Can You Safeguard Against Customers Defaulting On Your Middle Market Organization?

Certain situations can cause catastrophes no one plans for. So, it is difficult to list out items which will definitively help avoid defaults. However, the general guidelines of lending and banking can give a pretty good starting point.

Get to know your customers as much as possible. A quick Google search and a bit of history lesson about their organization can help start to form a picture. Simply having an in-depth conversation about your terms and billing cycles may be a good first step. You may consider implementing restricted fulfillment processes or a graduated plan until you are comfortable the client will pay within the terms. Proactively determining and documenting what your process for handling payment issues sets you up for success when the situation occurs. Taking these steps does not mean you do not trust anyone or that you look for bad things to happen. You want to have a partnership with customers so you can comfortably meet their needs without over extending your Middle Market firm.

Being stuck with a bill from a defaulted customer is a place no organization wants to find itself in. Your Middle Market company should assume it can happen and put some safeguard measures in place.

So what’s in the Mighty Middle Market for me? – get it right now at

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