Going Further: What Trade Credit Insurance And Invoice Financing Can Do For You

Though the UK recovery was looking promising, the Government recently announced a further 4 week delay on the initial date of June 21 to relieve most COVID-19 lockdown restrictions, dishing another blow to industries and SMEs across the country. The epidemiological environment has yet again proven its unpredictability, with the Indian Delta variant and now a possible Russian variant rendering any decision making beyond the immediate short-term unsustainable. While the lack of control over macroscale policies can feel debilitating, there nevertheless remain ways to retain authority over your own business affairs. We will be providing an overview of different financial services that we can help you use to maximise your business operations. 

Why Control Matters  

Most business operations rely on contingencies; we anticipate the amount of cash we will have ahead of time, make plans in the long-term, and anticipate the risks associated with them. When the environment changes beyond what was previously expected, a business is exposed to risk. In normal circumstances, risks can usually be reduced with sufficient contingency plans. However, the COVID-19 pandemic combined with the effects of Brexit has resulted in increased inequalities between SMEs and MNEs as well as an inability to adequately prepare for sudden changes. If a business does not have control over their expected payments and assets, cash flow problems can ultimately spiral into insolvencies, protracted defaults, or bankruptcy. We have seen this happen to too many SMEs in recent months.  

Making the most of invoice finance services will ensure protection against market turbulences that can make customers fail to repay debts that can stop you remunerating your funder. Using invoice finance will not only will retain any competitive edge you might have otherwise lost but can also open more opportunities that were previously not even available. It is often reported from business owners that they would like to go for bigger clients, but cannot because the insecurities of their other operations make such ambitions too risky.  Invoice finance services such as invoice discounting and factoring can make such opportunities possible, boosting your exposure to bigger enterprises. Furthermore, developing a sustainable and trustworthy relationship with your broker will guarantee bespoke financing, catering for the specific operations of your business and the market space you occupy. 

The Services Themselves 

There are a plethora of services within the invoice financing market. Broadly speaking, we can categorise invoice financing into factoring and invoice discounting. Factoring will involve the purchasing of sales ledgers and the outsourcing of certain credit control aspects including debt chasing, which would be a huge convenience for start up companies and small to medium enterprises. Time management is crucial for those who do not have the resources or staff to delegate their labours to, so having a broker arrange the best suited service will free up their schedules massively and allow more focus on their clientele. Unfortunately, the stresses of too little time for too much work result in the loss of sleep and functioning of business owners. Freeing up your calendar will likely entail benefits that are currently intangible but would only become clear once one has the time and freedom. For those involved in start-ups or new businesses, such liberty is essential. 

Invoice discounting also involves the outsourcing of labour that is imperative for business liquidity. It includes making prepayments against notifiable debts, relieving a business owner of the burdens of developing complex contingency plans regarding interrupted cash flow. There can be different arrangements of invoice discounting depending on the desires of your company. Confidential discounting will involve no assignment notices, keeping your relationship with the funder indirect with the debtors, which can be essential for those in certain sectors. If that is not necessary, disclosed invoice discounting is less discreet and can cover invoices up to a certain period. This can be particularly helpful for those in a circumstantial struggle that is only temporary. All of these services undoubtedly improve cash flow and liquidity, circumventing market turmoil and providing priceless peace of mind. FinCred CF aims tirelessly to provide this service to those by whom it is required, tailoring finance facilities to your company’s individual requirements. 

While invoice discounting does not directly involve ledger management, it is, as with factoring, often accompanied by the funder’s bad debt protection. However, it is paramount to discuss with your broker the best arrangement of trade credit insurance (an alternative to the funder’s bad debt protection) possible to offer the most comprehensive protection against non-payment of your customers’ debts. Clients typically fail to repay debts on time for a few reasons, often involving unreconcilable cash flow issues of their own, such as bankruptcy, insolvency, or protracted defaults. That said, it can also unfortunately arise from larger companies not feeling to need to conduct due diligence on smaller enterprises. In these situations, trade credit insurance can protect you against such so you can reimburse your funder in the case of your customer’s r non-payment. It is particularly important to economise on a personal relationship with your broker to understand your fiscal milieu and provide the best policies, saving even more money. As your business grows, so will your number of customers; in order to achieve successful funding limits for your needs, FinCred IS can help negotiate the most fitting insured credit limits on your customers. Working with a broker who is conscious of your enterprise’s sensibilities will reify an insurance policy amounting to successful claim pay-outs when you need it the most

If these services feel beyond your responsibilities, don’t worry; that is the point. A successful broker will read the terrain for you and provide bespoke servicing, ensuring funding, security, growth, and peace of mind. Furthermore, a good broker will provide bolstered client intelligence, leading to more accurate decision making and further reducing surplus risk. Insurance policies can also cover externalities in sectors beyond your control, such as those regarding political risks. FinCred IS incorporates intimate relationships into its business ideology, doing its utmost to yield protections for institutions lacking safeguards and having been dealt a heavy hand. Only good can come from getting in touch if any of this article resonates with you—it is often from delaying action that SMEs face insolvency down the line. 

A Prosperous Policy 

If these struggles relate to your circumstances, we highly recommend contacting FinCred for specialist advice and action in a timely and sensitive manner. Unfortunately, it is often when owners are so busy in covering their duties and have such little time that proactivity is needed the most. A salient portion of SME insolvencies come from delaying decision-making, with owners believing that they can continue to work endless hours to stay afloat and stick to the course. Such stress is not always necessary and can often be avoided. By using our bespoke brokerage services, we guarantee our best work to identify those policies that prosper you the most. The current financial fiasco represents a formidable injustice, affecting business owners across the country and strong-arming them into frustrating conditions (to say the least). Join us in helping combat that problem. 

Post Date | June 17, 2021
Post Author | Guy Letheren
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