Managing your business's credit risk at a time of economic uncertainty

UK corporate insolvencies are set to increase in 2022 and are forecast to be 33% higher than in pre-pandemic 2019 according to the specialist credit insurance company, Atradius¹. At the same time, research conducted by Specialist Risk Insurance Solutions highlights that the risk of economic slowdown / slow recovery was ranked as the second most difficult to manage².

For B2B companies supplying goods or services on credit terms, managing trade credit risk in a debtor ledger that probably equates to around 25% of annual turnover has always been a challenge and is an area of specialist expertise.

If offering credit terms is critical to securing sales, then positive decisions need to be made but the risk of a wrong decision – resulting in a bad debt – is damaging and potentially terminal. Former directors of Midas Group (which went into administration in February 2022) stated

“In recent weeks we have been greatly saddened to see our former company fall catastrophically into administration and more recently to be made sickeningly aware of the enormous indebtedness which it is predicted will result in the unsecured creditors, the great majority of whom are subcontractors, recovering nothing of what they are owed.” They added: “For many such small businesses the outcome will be terminal, for many there will be personal and family hardship, for most there will be undeserved anxiety not of their own making.”³

Could Trade Credit insurance be the answer?

Credit insurers provide security to thousands of UK companies to support billions of pounds of sales within the UK and across the world. Insurers are supplied with up-to-date financial information (often confidentially) by vast numbers of companies and constantly monitor payment patterns.

Any company that provides goods or services to other businesses on credit terms may benefit from Trade Credit insurance. Companies from small SMEs to major internationals can and do benefit from this type of cover.

Trade Credit insurance:

• Protects your business against the risk of a customer being unable to pay for goods or services provided on credit terms
• Protects your business even if the customer becomes insolvent
• Supports best practice credit risk management processes and procedures
• Improves business reputation and stability
• Frees up cash from bad debt reserves for better commercial use elsewhere

Get in touch

To find out more about protecting your business during a period of economic uncertainty, get in touch with our dedicated Trade Credit specialists.

Sources

¹ https://www.creditinsurancenews.com/atradius21article.php

² https://srinsurancesolutions.co.uk/news-and-articles/protecting-your-business-in-2022-and-beyond

³ https://www.constructionnews.co.uk/financial/administrations/ex-midas-directors-warn-firms-collapse-could-be-terminal-for-subcontractors-04-03-2022/