Let’s look at an example. A company generates twenty million euros in turnover. The average payment term is seventy-five days. This means it has just over four million euros outstanding from customers – money that has already been earned but is not yet in the bank. As turnover grows, that amount increases further. The question is not only whether those receivables are covered by credit insurance, but also why you would wait for money you have already earned. Factoring offers a solution to this, as it provides liquidity. Credit insurance and factoring are still often seen as two separate solutions. That makes sense, but it is precisely the combination of the two that is of interest.
Three steps
This combination involves three steps. Credit insurance provides protection and limits the risk of non-paying customers. Credit management offers continuous insight into the quality of your debtors. Up-to-date information is essential for making timely adjustments. It ensures control. Factoring frees up cash. It converts outstanding invoices into liquidity more quickly and provides greater financial flexibility.
Protect, manage, free up
These three steps (protecting, managing and freeing up) result in lower risk, more cash and greater financing scope. For greater commercial freedom. Debtors are not just your customers; they represent turnover, credit risk and capital. The trick is to strike a balance between these three.
Would you like to know how this works for your business? Please feel free to get in touch with your Xolv adviser.