Basic business principles - Profit shows direction, but cashflow can kill.

[Dave A]

Some really good advice there Ryss. The only one I'm hesitant about is the Credit Insurance. My experience is that insurance is offered for a profit. If you salt away the instalments (build up that reserve you mentioned), I'd expect this to prove more "cost effective."

And you get to keep the money if you keep on top of your debtors

[Ryss]

Yep .. that would be nice. But financing a debt for 60 days is one thing. Having the debt go bad, when it represents even 20% of the total book will just about kill any small business.

So it all depends on the risk. Small businesses are not risk experts, so yes it does cost, but it is a cost that could save your business.

I have heard of many small businesses going under because their major customer defaulted on the debt.

[Dave A]

I have heard of many small businesses going under because their major customer defaulted on the debt.

True, but the real problem there is they are that dependant on a single major customer.

I get real twitchy if a single customer gets past the 10% mark. Solve it by getting more customers.