Credit insurance, when used as a sales expansion tool can provide an outsized return on investment, as measured by the amount of premium paid. A typical midsize business can show increased profits of hundreds of thousands of dollars with modest sales increases due to trade credit insurance.
For example a business with $20 million in annual revenue and can increase sales to new and existing customers by only 5% due to increased credit can show increased profit of $150,000, after insurance costs, in addition to indemnifying their largest asset.
- Annual revenue: $20,000,000
- 5% revenue increase: $1,000,000
- Average gross margin: 20%
- Gross Profit: $200,000
- Premium .25%/revenue: $50,000
- Profit after premium cost: $150,000
In this case for a cost of $50,000 the business was able to:
- Indemnify the largest asset on the balance sheet
- Increase Revenue, open access to new markets
- Have access to Global trade credit risk analysis
- Enhance their borrowing ability
- Strengthen the internal credit management process
- And -
Make $150,000 in additional profit!
Trade credit insurance continues to demonstrate how it both makes and saves company money.