Did you know that in 2021, the global credit market reached a staggering £9.782 trillion? Understanding the complexities of credit management is crucial, especially in industries like recruitment where cash flow is so important. In our recent webinar, we broke down key insights and strategies. In this blog we will recap these areas and what was covered.
" There are approximately 35,000 businesses using invoice finance receiving 20 billion in advances to support recruitment and other sectors. Recruitment is a very popular within invoice finance.”
Chris Walsh, National Sales Manager at Giant Group started the conversation talking about the current economic situation, mentioning rising inflation and interest rates. He explained how global issues like supply chain problems and political tensions are causing prices to go up across different industries, putting pressure on businesses.
Chris focused on the construction industry, which faces challenges due to economic uncertainties. He stressed the importance of credit insurance to reduce risks, giving examples from sectors like construction and retail.
Looking ahead to 2024, Chris has predicted more businesses facing financial problems and highlighted how this affects the recruitment industry, leading to talent shortages and job losses.
Effective credit management
Alison Small, CEO of Giant Finance+ discussed effective credit management strategies. She emphasised the importance of managing cash flow well and explained different options like trade credit, invoice finance, and loans. She advised businesses to have diverse funding sources to handle economic challenges better. She also talked about trends in credit and choosing reliable finance partners.
Obtaining credit
There are two primary avenues for obtaining credit: trade credit and invoice finance. When it comes to managing workers who aren't permanent staff, it's important to know about the mitigating risks and how we deal with them.
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Trade credit
Trade credit is a form of credit extended by suppliers, allowing them to purchase goods or services on account and pay for them at a later date. Many companies use trade credit to manage their cash flow. Trade credit is often perceived as a low-cost option, although it's important to note that there may be associated costs within the supplier's terms.
Outgoing cash can be delayed by obtaining trade credit from suppliers. Getting trade credit will generally depend on the credit rating of your business. The business bank gives some useful tips to improve your credit score to help maximise the trade credit you can obtain.
In our case, some recruitment agencies use trade credit to manage their cash flow when dealing with suppliers, like umbrella companies.
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Invoice finance
When it comes to managing your invoices, invoice finance is here to support you. Whether you're a new business or facing credit challenges, Giant Finance+ has solutions. We know how tough it can be to get financial help, especially for small businesses.
Our invoice finance service is designed to simplify things for you. We can extend our support directly to your clients by providing them with insurance. This means you can access more credit and worry less about potential risks.
It’s essential to understand and minimize risks like interest rate fluctuations, credit issues, and liquidity concerns. The great thing about invoice finance is that they're typically committed and governed by signed agreements, providing long-term reliability.
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Uninsured debt
When considering the suppliers providing payment or credit terms, it's important to assess whether these suppliers extend these terms consistently across their group or if they use them as leverage to secure preferred supplier status. If they fail to insure the debt associated with these commercial terms, it could pose issues for your business, especially if there are disruptions in the supply chain. This could potentially impact your relationship with them.
It's vital not just to focus on the present economic landscape but also to consider if the business and its supply chain can support you in the medium to long term, say, over the next six to eighteen months. Economic conditions and risk attitudes evolve, so it's crucial to ensure that the benefits gained from leveraging payment terms and increasing working capital are supported by insurance and backed by a financially stable business.
Businesses need to find the right mix of trade credit and finance. This helps keep their cash flow strong and their finances stable, not just for now but also for the future. Businesses don't just want to survive day-to-day; they usually have plans for the next three to five years. It's crucial to team up with partners who offer both invoice finance and trade credit to help you grow successfully.
How we can help:
With trade credit, we offer credit terms based on a business's credit rating. We also look at how reliable they are with payments. This can help them grow in the future.
We also offer invoice finance for the recruitment sector with optional bill and pay systems/payroll services. Invoice finance is one of the most popular forms of working capital finance as it allows businesses to raise finance against these outstanding invoices receiving instant cash. As this type of finance is a secured finance, this is available at a lower cost than other unsecured options such as overdrafts.
Q/As
In response to audience questions, Chris and Alison addressed challenges in obtaining trade credit and strategies for improving creditworthiness. They stressed the importance of tailored solutions and open communication in navigating the credit landscape successfully.
Remember, proactive credit management is key to business growth. Stay tuned for more updates and insights from Giant Group as we continue to explore trends in workforce management. Also, If you missed the webinar and would like to watch it, please click here!
