Revenue is vanity, profit is sanity, and cash is a reality.
The old saying couldn't be any truer in Australia's business environment, where small to medium enterprises (SMEs) success or failure is often reliant on their management of cash flow. From the insurance brokers perspective this fact presents an opportunity to add value to clients by advising on a range of products perfect for safeguarding precious cash.
Whether we're talking income interruption, professional liability or premium funding, it's essential that brokers understand the needs of SMEs and sell products to help meet them. To that end, we've had a look at the importance of cash flow for SMEs, as well the role brokers can play in safeguarding cash flow.
Cash is reality
The phrase 'cash is reality' refers to one of the base truths of running a business. Without cash in the bank the show can't go on, business operation grinds to a halt, suppliers won't be paid and neither will employees.
A Wolters Kluwer survey of 1,000 small businesses found that 61% of respondents said that failure to manage costs or anticipate rising costs was the main reason behind insolvency.
Credit analysts Dun & Bradstreet puts that number even higher, estimating that 9 out of 10 SMEs fail because of poorly managed cash flow. Obviously that's a position that no SME wants to find themselves in, but unfortunately they often do.
It's clear then that the importance of accurate forecasting is essential for SMEs looking to safeguard themselves, but what exactly is the insurance broker's role in protecting such businesses?
A broker's role in protecting SMEs
Knowing client's cash flow risks and smoothing them out with personalised cover is the approach of most successful brokers.
At its core, the insurance brokers role is the same as any salespersons. The ultimate goal should always be to provide value and solve problems by providing products that fit the client's needs – not to hard sell and maximise profits.
While hard sellers may profit in the short term, the more sustainable, ethical and long-lasting operators solve problems, growing through repeat business and customer referrals. This requires more specific knowledge, time with clients and hard work, but it's worth it in the long run.
There'are a number of ways that brokers can add this value in regards to safeguarding cash flow.
For example, let's look at the cost of a lawsuit. If someone sues your small business and loses in some states you're only entitled to claim back 25% of your legal costs. This means a failed lawsuit against you could still end up costing your business thousands.
For businesses in industries with risks of legal reprisal (i.e media, construction), professional indemnity insurance should be the first product brokers recommend to minimise the cash flow troubles such lawsuits could cause.
Knowing client's cash flow risks and smoothing them out with personalised cover is the approach of the most successful brokers.
Offering a diverse range of solutions
When it comes to insuring Australian SMEs, one size does not fit all. In such a diverse environment, insurance brokers need to be able to offer cover of all shapes and sizes, so that they can provide value and help a diverse range of businesses.
One of the most useful tools in the kit of any broker is premium funding with Attvest Finance. With cashflow in the back of every business decision maker's mind, premium funding allows them to pay for their cover in instalments over the year, instead of up front.
This smoothes out the impact the cover has on SMEs cash flow, while allowing them to purchase the insurance they need to mitigate any future mishaps. Get in touch today to find out more about how Attvest Finance can help your provide value.
