Political life may have settled down after the turmoil of the last year, but uncertainties and pressures remain for businesses. The war in Ukraine, disruption to global supply chains, inflation, rising interest rates, and ongoing industrial disputes are continuing to turn the financial screw and push some companies to the brink.
All this points to another rise in corporate insolvencies this year, and you may already be looking nervously at suppliers and customers and asking, Can we afford to take the risk?
But there are ways to find peace of mind. Here are ten things you can do to help your business thrive in 2023, with help from Coface:
1. Review your current business terms
Check the wording of standard contracts and payment terms with a contract lawyer to ensure they are clear, including your legal right to charge interest under the Late Payment of Commercial Debts (Interest) Act 1998. If you don’t have one already, we also advise a Retention of Title Clause, which protects your assets by affirming your continuing ownership of the goods until payment has been received.
2. Strengthen your customer due diligence
This cautionary tale shows what can go wrong if you are too trusting—customers could still be risky business, even if they are registered, have trade references, and pay your first invoice in good time. The UK Government wants to tighten up the rules on company registration with an Economic Crime and Corporate Transparency Bill, but home or abroad, you should always carry out your own checks to confirm the company is genuine and creditworthy. With access to real-time financial, trading, payment, and fraud information on 130 million companies worldwide, Coface Business Information is a valuable due diligence ally.
3. Don’t take the financial health of suppliers for granted
It’s not just customers that require due diligence. A supplier that fails after you have paid a deposit for raw materials or who struggles to fulfil an order could be equally costly. As well as providing detailed business information so you can check the solvency of a supplier, some Coface policies offer advance payments to suppliers cover so you can protect yourself if the worst happens.
4. Crack down on persistent late payers
We all have customers who treat payment terms as guidance rather than a contractual deadline. Coface can advise whether their poor payment behaviour is a sign they cannot pay or they simply won’t. That will help you decide whether they represent too great a risk or if your credit control needs to get tough.
5. Be proactive on credit control
Of course, it’s not enough to send out statements and chase overdue invoices; your accounts department should also be alert to deviations from the norm or deteriorating trends in customer behaviour and communicate this information to the relevant account manager so they are aware when discussing new orders. Credit management should be a business-wide concern.
6. Tap into Coface’s business intelligence
Our Business Information Team digs deeper to assess a company’s probability of payment default over a twelve-month period. These Debtor Risk Assessments (DRAs) and our credit opinions are based on payment incidents and new information from Coface’s global network. That real-time data means we can flag up potential problems at an early stage and help you navigate towards lower-risk businesses. And now we can provide a complete picture of the changing trade risks affecting your business with our new URBA online risk management tool. You can instantly see the risk profiles of different countries, sectors, and individual customers and drill down to find out more.
7. Protect your sales without tying up your working capital
Coface credit insurance indemnifies you against losses arising from non-payment or protracted default, so you can protect your bottom line. We offer policies for all types and sizes of companies, including TradeLiner, a comprehensive credit management service that includes information, insurance, and collections, as well as the flexibility to customise your cover to meet specific risks. Unlike other options like self-insurance or factoring, credit insurance doesn’t tie up working capital; you can recoup up to 90% of the invoice amount, and Coface pays claims as quickly as 30 days.
8. Outsource your collection battles
When it comes to paying up, some customers find it more challenging. Whether it is an overseas company where the language, culture, and time zones are different or they are simply playing hard to get, outsourcing to a specialist service could save you time and money. Coface International Debt Collection has a global network of dedicated offices and a team of trained, multi-lingual professionals ready to act on your behalf. We have the financial resources to investigate late payers and take legal action where necessary, although our name and reputation are usually enough to get results.
9. Pursue your business goals
According to the Office for National Statistics, business investment fell by 2.5% in Quarter 3 of 2022 and remains way below pre-pandemic levels. This is worrying because it suggests companies lack the confidence and/or financial means to grow and fulfil their potential. If you spot an opportunity that is too good to miss, the good news is that having credit insurance can strengthen your case with investors. By demonstrating that your company has limited its exposure to financial shocks, you are in prime position to attract investors on the best possible terms.
10. Keep track of developments in your markets with Coface’s economic reports
Coface experts assess social, economic, and political risk factors, as well as current and predicted insolvency and payment trends in 160 countries and across 13 industry sectors, so you can stay up-to-date. Our detailed reports are freely accessible at https://www.coface.com/Economic-Studies-and-Country-Risks.