Businesses stockpiling cash as buffer for ‘Brexit’, could consider credit insurance as an alternative

According to research by Hampshire Trust Bank, almost 45% of businesses now have plans to increase the amount of cash in their business and savings accounts, in a bid to create a ‘cash buffer’ against uncertainty. This represents a 6% increase in businesses worried about uncertainty, with 38% the normal maximum for businesses stockpiling cash.

As well as looking at stockpiling, the research also highlighted variations across different sectors, in terms of the amount of money currently held on account, as well as the potential plans to increase stockpiling. It found that 45% of telecoms businesses plan to stockpile, nearly 50% of charities and almost half of all legal businesses.

According to Tom Rolfe, Director of The Channel Partnership, stockpiling funds to weather uncertainty is not the only option and is not necessarily the best option for businesses either. He comments “Stockpiling is a natural way to limit the impact of unexpected changes in the business environment, of which Brexit is a key example. Psychologically, it provides a buffer which makes businesses feel more comfortable, but in real terms, it also ties up cash that could otherwise be reinvested into growth, development, research and a plethora of businesses activities which keep British businesses at the cutting edge of what they do. It is a double edged sword – stockpiling can protect against uncertainty, but it can also create the very uncertainty it seeks to prevent, as businesses fall behind and stop innovating.”

He continues “There is an alternative option which will be right for some of these businesses; credit insurance is a proactive insurance policy which not only pays out in the event of bad debt – the lifeblood of uncertainty – but also helps businesses to make informed decisions about their customers and potential customers in terms of extending credit terms. This allows businesses to be more responsive to industry trends, better informed of potential obstacles, and releases stockpiled cash to continue operating, because of the assurance that bad debts will be paid. Yes, there is value in stockpiling, but there is also merit in looking at all the options and identifying whether that money would be better invested in driving the company forward, while an insurance policy provides the buffer.”

Anyone interested in having a conversation about the most appropriate way to manage risk within their business, plus the potential benefits of credit insurance should contact Tom Rolfe and the team on 01275 817320.