Check the insurance claim before settling the insured customer debt
Check recovery control and allocation under an existing trade-credit insurance claim before settling a large insured customer receivable.
Corporate Recovery Partners
01 / 06
Two connected files need one clear instruction
A customer offers to settle a large overdue account after your business has made a trade-credit insurance claim. Before accepting, put the debt file and insurance file together for advice. Do not assume that an insurance payment leaves your business free to release the entire customer debt or keep every later recovery. The answer needs the actual documents.
Imagine a supplier owed $500,000. Its insurer has paid an amount under a claim, and the customer now proposes a discounted final payment. Record what was claimed, what was paid, what remains under review and which invoices each amount concerns. Give the broker and lawyer the proposed settlement before anyone promises that it will close the account.
Business.gov.au recommends understanding contract terms and seeking advice about unclear wording. Apply that discipline to the policy, claim correspondence and any recovery instructions. Ask who can negotiate or release the debt, what consent is required and how later receipts must be handled. This is a document-specific enquiry, not a statement that every policy imposes the same conditions.
Prepare a reconciliation showing the customer account, insurance receipts and any uninsured amount identified in the claim records. Avoid subtracting the insurance receipt from the customer's legal liability merely because it reduced your business's cash shortfall. Ask the accountant and lawyer how the different balances should be recorded. An accounting entry alone does not determine ownership of recovery rights.
In the supplier's example, ask for written clarification of how the proposed customer payment would be allocated and what obligations would remain. Include recovery costs where relevant to the actual arrangement. Do not budget the whole offer as unrestricted business cash until the allocation is understood. Keep an expected amount separate from money received and available to spend.
Provide the same final proposal to the authorised advisers and obtain the required instructions before committing. Preserve the agreed allocation and update the related records when payments occur. The practical task is to settle an insured receivable with its connected claim properly accounted for. A commercially attractive figure still needs a clear answer about who may accept it and who receives it.
