factris invoice financing factoring

Debtor risk: how can you limit it?

Every entrepreneur has to deal with it: debtor risk. But what exactly is it? And what does it mean for your business? Find out here what exactly debtor risk is and how you can limit it.

What is default risk?

Accounts receivable risk is the risk that a business faces when debtors pay invoices late or even fail to pay. If you provide a product or service, you obviously want to get paid for it. Failure to pay can have unpleasant consequences. For example, not being able to meet payment obligations or inhibiting the growth of your business.

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How can you mitigate debtor risk?

So, debtor risk is not beneficial for a business. Fortunately, there are also actions you can take to mitigate debtor risk. One way to mitigate debtor risk is to ensure good debtor management. Debtor management ensures you have a clear plan and rules, which will help you avoid the risk of default.

In debtor management, debtors are kindly notified of outstanding invoices and reminded of payments. This keeps the relationship with the customer good and reduces the risk of default.

Why use factoring against debtor risk?

Accounts receivable management is a good measure to reduce debtor risk. Yet it cannot prevent the risk. With factoring, you have the option of avoiding the entire debtor risk. What exactly is factoring? With factoring, you sell invoices to Factris. We take care of debt collection and credit insurance. By using factoring, your factors are paid and the risk of insolvency is insured. So you are insured against insolvency and non-payment. A lot of security, versus a small amount that we deduct from the value of the invoice.

Do you have questions about the cost of factoring or the possibilities for your business? Feel free to contact us.

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