Category Archives: Bookkeeping

Financial institutions like banks avoid extending credit to businesses with high accounts receivables. This is because it is a risk for them if you cannot collect outstanding payments from your customers. However, it serves as a safety check when you have insured your accounts receivables. It gives a positive signal to your lenders, making them more open to financing you on favorable terms.

The Best Accounts Receivable Reporting Software Solutions of 2026

Accounts receivable is a critical component of your business’s balance sheet. It represents the money you expect to receive from customers after delivering your products or services, and is classified as a current asset. Accounts receivable insurance, also known as trade credit insurance, is an essential tool for businesses that offer credit to customers. It provides protection against the risk of non-payment by clients, ensuring that companies can recover outstanding debts in case of a default. This type of insurance can offer peace of mind, financial stability, and long-term growth opportunities for businesses that rely on credit as a primary mode of transaction.

• Accounts Receivable Insurance (also referred to as AR Insurance) is a simple and cost-effective form of insurance coverage that protects your business from nonpayment for your products or services.
• This secures profitability and supports financial stability in high-risk environments.
• While our goal is to eliminate losses, your ARI broker will be there to guide you in the event you do have to file a claim against a policy.
• For most businesses, the cost of trade credit insurance remains affordable, typically under 1% of sales revenue.
• Meet Cowan expert Mari-Jo Boucher, Commercial Account Executive for Trade Credit and Political Risk at Cowan Insurance Group.

Protects against non-payment

This stability can be a game-changer for businesses looking to maintain consistent sales planning. A carrier’s financial health is crucial for ensuring claims are paid when customers default. To evaluate this, we looked at credit ratings, capital reserves, and market presence.

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• Many of the organizations who joined us at the start are still with us today (we’re proud to enjoy a retention rate pretty close to 100%).
• They offer just one policy called Modula, which has different “building blocks.” These blocks can be integrated in various ways to form a customized solution for any business.
• However, it serves as a safety check when you have insured your accounts receivables.
• Backed by Allianz and with more than 125 years of expertise, Euler Hermes’ global business intelligence is unrivalled.
• Take, for example, a company in the oil industry, which is prone to economic fluctuations.
• Combining deep industry expertise with cutting-edge technology, Coface makes 12,000 credit decisions daily while keeping tabs on over 195 million companies worldwide.

Increase client satisfaction by ensuring that they receive the products or services they have paid for. Ryan Babeu, Alliant Trade Credit speaks with Christina Montes de Oca, CCO, Allianz, to discuss the current state of the economy and evaluate the potential risks of a global recession. Explore industry trends and financial protection from the International Credit Insurance & Surety Association (ICISA). A Canadian business was expecting to make a $50,000 profit on roughly $1 million of annual sales. However, one larger customer owing $60,000 didn’t pay due to bankruptcy wiping out the profitability of the business.

How can trade credit insurance help businesses manage risks like supply chain disruptions and customer non-payment?

AR financing lets you obtain early payment by committing your accounts receivable to a financing company. This approach provides instant cash flow improvement, allowing you to meet obligations without waiting for customer payments. Insurers analyze payment histories, financial statements, and current market conditions to assign proprietary risk grades to each customer. This analysis forecasts default probability and helps establish appropriate coverage levels. Essentially, you’re gaining access to credit intelligence that would be expensive and time-consuming to develop internally.

Protecting Your Business: Accounts Receivable Insurance Explained

If your business deals with a large volume of payments, this type of insurance could be beneficial. This type of insurance provides a safety net against non-payment, ensuring your cash flow remains stable even if customers default on payments. While insurance protects against non-payment, factoring provides immediate capital at higher effective costs, sometimes accounts receivable insurance reaching APRs over 40%. Choose factoring when you need cash now, insurance when you want protection later.

• The final rate depends on your industry risk profile, customer concentration, historical loss data, and geographical exposure.
• For a business operating with a 5% profit margin, a single $100,000 default forces you to generate $2 million in new sales just to recover the lost profit.
• Companies use this approach for budgeting and bad debt allocation, essentially creating a cash reserve for catastrophic losses.
• Bad debt is one of the most significant risks facing businesses that extend credit to their customers.
• There is no additional cost to you for using a trade credit insurance broker.
• Accounts receivable insurance, also known as trade credit insurance, is an essential tool for businesses that offer credit to customers.
• In this case, the insurance company will determine whether to approve the coverage by investigating the risk.

It’s important to distinguish accounts receivable insurance from accounts receivable factoring—a financing solution often confused with insurance. While factoring involves selling your receivables to a third party at a discount to receive immediate cash, AR insurance protects those receivables while they remain on your books. AR factoring may provide immediate liquidity but comes with higher costs and potential loss of customer relationships, as the factor takes over customer communication regarding payments. While European businesses have embraced accounts receivable insurance for decades, more and more North American finance teams are now recognizing its importance as part of a balanced risk strategy. Accounts receivable insurance (also known as trade credit insurance) creates a financial buffer between your business and customer payment failures.

Businesses with exceptionally large accounts receivable portfolios or those seeking additional protection beyond the limits of their Accounting Errors primary policy can opt for top-up or excess policies. It assists businesses in making informed decisions by assessing the creditworthiness of customers, reducing the likelihood of extending credit to high-risk clients. In the event of non-payment, the insured business can file a claim with the insurer.

Customer Risk Assessment

For companies with historically low bad debt, this could seem like an unnecessary cost. Given its disjointed, manual accounts retained earnings balance sheet receivable processes, Ironclad frequently faced delays in receiving payments from its reinsurance partners. However, after switching to an automated A/R solution, the business was able to accelerate the process, submitting paperwork in hours instead of days. With so many sources for potential revenue that each needs to be closely monitored, at least if you hope to be paid regularly, having efficient A/R processes in place is critical. Without them, you might overlook missed premiums or reinsurance recoverables.

We like Xero as our fourth choice for the best accounting software for small business because of its simplicity and ease of use. Xero’s cloud-based accounting software does what you would expect, like record transitions, calculate tax, and track both inventory and financial data. Plus, you can easily integrate with Gusto Payroll for an additional fee.

• For larger organizations or businesses with more complex financial needs, Sage Intacct offers a robust, cloud-based financial management system.
• When choosing an accounting system, the most important thing to think about is scaleability.
• The next plan, Plus, costs $115 per month, accommodates five users, and includes inventory tracking and project profitability tools often chosen by growing startups.
• When a system is easy to learn and pleasant to use, your team is far more likely to embrace it fully and use it consistently.
• Rules-based accrual automation becomes particularly important for companies with subscription revenue, deferred income, or complex timing differences.

What is the financial close process and how do I improve it?

These can handle essential tasks like invoicing and expense tracking, saving you time without breaking the bank or requiring a tech degree to use. Once you automate your accounting, the way you measure success needs to shift. Instead of tracking the hours your team spends on manual data entry, you can focus on more strategic key performance indicators (KPIs). Automating your accounting processes significantly impacts your business by changing how you manage finances, allocate resources, and plan for the future. Key metrics to watch include the time it takes to close your books each month, the average invoice processing time, the reduction in payment errors, and the accuracy of your financial forecasts. Tracking these numbers will give you a clear picture of automation’s impact.

How to pick the best accounting software for your startup

While Excel may work for very basic tracking, it doesn’t scale well, lacks automation, and can easily lead to mistakes. These tools are great to start with—but as soon as you start generating revenue or preparing for fundraising, you’ll likely outgrow them. Even if you’re pre-revenue, having a simple accounting system in place now can save you thousands of dollars (and headaches) later.

Real-time spend tracking and budget management

• For startups working with international clients, FreshBooks processes transactions in over 120 currencies.
• This process, which traditionally required hours of manual comparison, can run continuously in the background while accountants focus on investigating exceptions.
• In our always-on world, being tied to a specific computer or office to manage your finances just doesn’t cut it anymore.
• VC backed, early-stage companies have very different fintech needs than traditional SMBs.
• Up to 95% accuracy – Puzzle learns automatically, improving over time for faster, smarter financial management.s.

Most importantly, automation frees up staff to focus on higher-value tasks like client advisory services (CAS), strengthening client relationships, and scaling their firm. Startups working in or with Web3/Web 3.0, NFTs, Distributed Finance, etc. need an additional piece of fintech infrastructure to process their accounting efficiently and correctly. The best accounting software, like QuickBooks Online, has direct API connections into your bank account. You enter in your username and password, and the accounting software grabs all the financial transactions. For an early-stage startup, bookkeeping software and accounting software are the same thing – and our advice is that the top bookkeeping software for a funded startup is QuickBooks Online.

Financial Models

We’ve highlighted the 17 best accounting software for startups in 2025 that we believe offer a diverse range of features catering to the specific needs of startups. The best accounting software for startups varies depending on the company’s specific needs. Although it doesn’t provide a mobile app, Patriot’s 100% cloud-based accounting platform enhances accessibility.

Choosing the right software is a big decision, but it doesn’t have to be overwhelming. When you know what to look for, you can confidently pick a tool that fits your business like a glove. Focus on these key areas to find a solution that will save you time, reduce errors, and support your company’s growth. You can set up a process where an invoice is automatically generated and sent when a project is marked complete in your project management tool. The system can then track the payment and send reminders if it becomes overdue.

The Growing plan, priced at $47 monthly, is intended for small businesses as it provides unlimited invoices and bills along with all Early plan features. The Established plan costs $80 per month and includes everything in Growing plus advanced features like multi-currency support, project tracking, 180-day cash flow forecasting, and cash flow predictions. Essentials costs $75 per month, supports three users, and adds bill management along with additional automations appropriate for small teams. Choosing the right accounting automation platform depends on your company’s size, complexity, and specific workflow requirements. While many solutions promise to streamline financial processes, the most effective platforms combine powerful automation capabilities with intuitive user accounting services for startups experiences that actually get adopted by your team.

Finance as a Service (FaaS)

This makes it a go-to for mid-sized and large enterprises that need an all-in-one solution. Its accounting automation features are advanced, designed to handle complex operations and provide a holistic view https://jt.org/accounting-services-for-startups-enhance-your-financial-operations/ of the business. Think of it as your super-efficient digital assistant for all things finance.

Pricing Options

It is used as a proxy for cash flow while being focused on the income statement. For example, you will hear bankers, private equity investors, and those kind of folks use EBITDA as a proxy for cash flow. You need to get the information you need to make decisions and to ensure the utmost of financial health. Kruze’s team of professional bookkeepers will work with you to find the financial delivery date that meets your needs. Payroll taxes are taxes that ALL companies with payroll pay – even money losing, early-stage companies. This is a massive tax credit that your company should take advantage of.