Business growth requires far more than a successful sales team, good margins, and a durable business model.
All of these elements are essential, however there is also an often-overlooked business tool that can dramatically improve an organisation’s chances of success.
“Trade credit insurance is often viewed as a risk mitigation tool, and it definitely fulfils that role,” said Mark Hoppe, managing director, Oceania, Atradius. “However, there are ways to use trade credit insurance to actively grow your business, not just protect it.”
Atradius client, Ausfine Foods, is an Australian exporter that is very active in trading dairy and meat products around the world, including buying and selling from Australia, New Zealand, US, Europe and Asia, including the Philippines, China, Indonesia, Korea, and Malaysia.
There are five ways Ausfine Foods uses trade credit insurance to grow the business:
1. Supporting trade funding lines
International trade businesses rely heavily on bank trade finance. As a high-turnover, low-margin business, Ausfine Foods relies on having adequate bank funding in place to support large deals.
Garry Embleton, operations director, Ausfine Foods, said: “Without having trade credit insurance, bankers wouldn’t have comfort to provide the funding we need. Having trade credit insurance means we can achieve higher levels of funding from the bank to support the deals we want to do, and we have virtually doubled our finance by having insurance in place. This also lets us respond quickly to opportunities as they arise.”
2. Insuring the debtor book
As a global business, Ausfine Foods has, at times, a very large debtor book. With trade credit insurance covering 100 per cent of the business’s turnover, the owners and directors of the business have comfort that a debtor default does not spell disaster for the business.
“We have a comprehensive insurance policy that means, if a buyer falls over for any reason, the policy is robust enough to cover almost any eventuality, said Mr Embleton. “This protects cash flow and means the business can expand with confidence.”
3. Gaining valuable business insights for decision-making
Deciding which organisations to do business with can be difficult. It’s important to ensure customers have a good credit rating, are low-risk, and will contribute to business growth. Ausfine Foods relies on Atradius to provide insights on reasonable credit limits for each organisation it does business with.
“Atradius is the best among the competition when it comes to fast turnaround on insights and good dialogue on any problems with providing limits to organisations,” Mr Embleton said. “In many ways, Ausfine Foods is looking to grow by doing less business but doing better business. Insights from Atradius have helped us look more closely at what areas of business we shouldn’t be involved with. This has let the business grow to a point where we can say no to some potential customers.”
Ausfine Foods uses Atradius as its primary creditworthiness check on potential new customers, and the business takes Atradius reports very seriously, deciding whether to work with customers or not based on those reports.
4. Building stronger relationships through insurability
Growing a business requires strong relationships with suppliers. With the knowledge that these suppliers also have their own trade credit insurance requirements, Ausfine Foods leverages its insured status with Atradius to become a more attractive customer for potential suppliers.
“A key part of business is not just the credit insurance we take out but also knowing that suppliers take out credit insurance on us,” Mr Embleton said. “Having our debtor book insured makes us attractive to suppliers’ insurers, maximising the limits a credit insurer will offer. This can improve our capacity to trade with suppliers.”
5. Improving global competitiveness
Given the global nature of Ausfine Foods’ business, global reach is important in an insurer. It’s essential that the market insights Ausfine Foods receives in Australia are just as accurate and relevant when dealing with overseas organisations.
“Global reach is really important for Ausfine Foods because we need an insurer that can get buyer credit information across the globe,” said Mr Embleton. “These reliable market insights are vitally important and Atradius has that market reach.
“At the same time, Atradius can look at our business on an individual basis and tailor the policy to our needs and set premium rates at an acceptable level for us.”