Being in business means taking risks but most businesses do everything they can to mitigate those risks either by getting insurance cover or by adopting best practices to control them.

One area so many businesses fail to address properly is credit management.

Fact – if you offer credit payment terms to your customers you are taking a risk that that debt might not be repaid.

Over 80% of all business transactions in the UK are transacted on credit terms and it is a given in many sectors that a supplier will extend credit terms to its customers, but how can you minimise the risk to your business of debts not being paid on time or at all?

440,000 UK businesses could be forced to close this year due to late payment alone. A new study by the Federation of Small Businesses (FSB) warns that a worsening of the UK’s late payment crisis, high inflation and mounting admin for firms that trade internationally will cause the business community to further shrink in size if left unaddressed. The study of more than 1,200 UK business owners, finds that 30% have seen late payment of invoices increase over the last three months, with a further 8% experiencing other forms of poor payment practice. Only 6% say that a change in payment terms has been agreed over that period. As a result, 8% say that late payment is now threatening the viability of their business. This equates to around 440,000 UK businesses that could be forced to close again this year due to late payment alone.

If you offer credit terms, here are some questions to consider:

  • Do you have a robust and effect credit management policy in place that is followed and executed by trained and experienced staff?
  • Do they have support mechanisms to help them manage the risks?
  • What happens when they cannot collect a debt?

UK businesses report losing £8 for every £100 billed in the last year due to the non-payment of invoices. The Atradius Payment Practices Barometer reveals that 44% of the total value of UK B2B sales were reported overdue this year, and a further 8% was written off entirely as uncollectable. This means just 48% of the total value of UK B2B sales was paid on time.

Trade Credit Insurance is a widely recognised tool that can greatly enhance your credit management and help your business make the right decisions when extending credit payment terms to both new or existing business to business customers. It provides access to financial information on your customers and mitigates the risk involved in offering credit terms. If you haven’t already explored how Trade Credit Insurance can safeguard your business against the sometimes-devastating effect of bad debt through non-payment or insolvency then you should get in touch with our Trade Credit team on tcs@ardeninsurance.co.uk

To find out more about our Services please contact our team today on T. +44 (0) 203 857 5373 or fill out the form below: