- Small business advice
- How to cut back on insurance costs
- Unemployed hit by insurance premiums hikes
- Home cover scams
- Crash for cash

In an ideal world all invoices would be settled within 30 days, all suppliers would be paid on time and insolvency rates would be much reduced.

Unfortunately the reality is somewhat different. In a recession companies typically sit on invoices often ignoring them for 90 days or even longer whilst those business who are waiting for payment have to still try and pay suppliers (or they themselves start stalling on invoice payment and the problem just spreads)

Cash flow is everything when it comes to surviving in a post credit crunch world. Many good businesses go to the wall, not because their services or products are substandard but because they are not paid on time or a major client goes out of business.

But help is at hand in the form of insurance policies specifically designed for small businesses. For instance Lloyds TSB Commercial Finance has launched a service to help small businesses guard against bad debts, as insolvencies are forecast to reach record highs.

Debtor insurance protects a firm's sales ledger by insuring up to 90% of any bad debts, both in the UK and internationally, suffered as a result of customer insolvency or the non-payment of invoices.

According to a report from leading accountancy firm BDO Stoy Hayward, about one in every 50 businesses will fail this year alone, with tens of thousands of insolvencies predicted over the next 18 months as a result of poor cash management.

Simon Featherstone, managing director of Lloyds TSB Commercial Finance, said: "Even the strongest companies can be significantly affected if a major customer suddenly fails. One bad debt can have a dramatic effect on a firm's balance sheet and wipe out years of hard work. A £5,000 bad debt can create a loss that could require £50,000 of turnover for the business just to stand still. We're seeing more demand from small businesses for a safety net and therefore launched the scheme to meet this need."

As well as being available online to Lloyds group banking customers, it can also be used by non Lloyds customer and all firms that sell to other businesses on unsecured credit terms. The scheme includes a credit monitoring service which alerts businesses to changes in the circumstances of their customers, so they can identify a potential risk before it becomes a bad debt. Companies are also able to manage the facility online and request limits on their customers.

If cover cannot be provided on at least 55% by value of a customer ledger within 30 days, the insured will be offered a full refund. The service also allows 30 days notice to be given at anytime to cancel the policy.

Case study: Carneco Foods Ltd.

Amongst Lloyds TSB Commercial Finance's customers who have benefited from Debtor Insurance since it was piloted in late 2008 is Essex-based Carneco Foods Ltd. Established in 1994, Carneco Foods is a wholesale food supplies company.

Carneco Foods was concerned about the risks to its business if a customer failed and so approached Lloyds TSB Commercial and was told about Debtor Insurance.

A spokeswoman for Carneco Foods said: "In the current climate, it has never been more important to insure your debts and manage risk. Debtor Insurance provides peace of mind that if a customer files for administration, our working capital is protected. Debtor Insurance is an important part of our growth strategy as we can continue to cover our expanding customer base.

She adds: "The protection offered by this service means we can reduce the amount of money we need to set aside to cover risk of bad debt and instead, free-up working capital to enable us to seize growth opportunities."