How trade credit insurance speeds up order-to-cash cycle

Show me your order-to-cash cycle and I’ll show you how your business works. And in my experience, a company’s order to cash cycle – the process through which a business receives, processes, manages, and fulfils client orders – can almost always be improved.

A smooth order-to-cash cycle helps ensure the effective management and overview of all parts of the transaction. This includes approving an order, making invoices, shipping the merchandise, receiving money or  dealing with cash flow problems  , and reporting on the entire process. Large and small businesses alike can improve this cycle in very concrete and surprising ways when they partner with a  trade credit insurance provider . Regardless of the size of your company, working with a credit insurer can help expedite and clarify your entire order-to-cash cycle.

Once a company enlists the help of a trade credit insurance provider, there are a few tools and options that are available. First, they may simply rely on externalized  credit risk analysis  . Most of the time, this provides an immediate perspective on how risky a transaction is. Second, companies have access to a web platform to follow the live progress of their portfolio. This shows them the coverage they have access to and dashboards about their environment and their requests. This way they can use their trade credit insurance policy to improve the overall efficiency of their  credit management  processes.

Another popular solution consists of setting up an API to create a seamless transfer of information between the two parties. With both of these tools, the company’s finance department will then be able to see the amount covered by the credit insurer, and know exactly where they stand in the order-to-cash cycle. They can see if orders have been paid, and what their capacity for action is. For large companies, the built-in benefits of using trade credit insurance ultimately come down to improved speed with live and accurate oversight.

Businesses that use  trade credit insurance  experience on average less delay in  collecting payments  . Typically, their customers will pay them 5 days earlier than an uninsured business. It makes sense, because when everything is structured, people become accustomed to following deadlines. It smooths out the process of tracking and declaring late payments as well, reducing  days sales outstanding (DSO)  .

You don’t have to be a big player to benefit from trade credit insurance or use software and APIs. For smaller companies with different needs, credit insurance offers other advantages. It provides an external support and infrastructure that streamlines the order-to-cash cycle. For example, instead of repeatedly sending  unpaid invoice letters  , you can just say “I'm going to defer to my credit insurer.”

Experience has shown that the debtor will take it seriously. Trade credit insurance offers a soft yet firm influence that dissuades customers from risking their reputation. Once a customer has been identified as problematic and becomes a debtor, they risk their reputation in the industry and diminish their chances to find business partners. Having the support and authoritative structure from trade credit insurance is a firm yet non-aggressive reminder that your company takes its business seriously. To give you a quick illustration of this efficiency: as a trade credit insurer, at Allianz Trade, we collect over 100,000 debts each year in more than 160 countries, of which 50% take place during the first week. Most notably, those recoveries come from friendly agreements rather than legal procedures, which allow trading relationships to continue.

We offer counsel and support to all types of companies wishing to protect their order-to-cash cycle. We have a robust network of experts with in-depth knowledge across industries ready to advise on the best partners to do business with. We can help you choose reliable clients and  protect your business from the non-payment  of goods and services.

In my experience, the companies we help find that orders are approved faster, they have a 360° perspective, and payments are monitored within the framework of a structured policy. And they get the support from their credit insurer to collect debts or become indemnified.