Accounts Receivable Insurance

  

See Accounts Receivable Financing. If you're actually worried about the lions eating your clients before they pay, you can buy accounts receivable insurance, which is, in essence another form of factor. In this case, the system works like term life insurance. The one seeking the insurance pays a fee of, say, 1% of the total amount of money at risk after the accounts receivable insurance company has thoroughly vetted the credit worthiness of the one owing the money, and scoured every term on the contract.

If the account receivable is paid, then the insurance company keeps all of the premium paid to them, i.e., a notional profit margin of 100%. Obviously, those seeking accounts receivable insurance are a self-selected group, likely sniffing risk in the dead-beatism factor of the people owing them money, or they wouldn't have bothered to seek out insurance in the first place. So while the AR insurance industry may seem like a crazy good business to own, things don't always work out. Ask the fat lion for details.

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Finance allah shmoop what is cash flow versus earnings Okay

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spell it P r o p h e t s

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sales or steady producing cash profits of fifty million bucks

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in the bank Well that bank account went down to

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dollar check But it gradually filled back up to seventy

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five million by the time that year was done fifty

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million of profits and that fifty million in cash Yeah

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that that helps that floated right back in there Okay

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hundred twenty five million to start But then i went

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