Although primarily a health crisis, Coronavirus has caused the worst decline in the UK economy in 300 years. Adding to the downturn, one troubling number continues to climb: unpaid invoices.
According to a study published by SideTrade, unpaid invoices in the UK are up 41% amid the Coronavirus pandemic, with nearly two in three invoices unpaid.
SideTrade analyzed 27 million invoices accounting for more than $54 billion in B2B transactions across Europe, and the UK isn’t the only country feeling the cashflow crunch. French businesses are seeing an increase of 72% compared to pre-COVID rates. Europe, hit hard by Coronavirus, has seen an overall increase of 82.7% since the pandemic. No country has been hit harder than the United Kingdom.
To weather the challenging times ahead, SMEs are finding a lifeline with outsourced trade credit. If there is anything that the Coronavirus pandemic has affirmed, it’s that your credit management strategy largely determines your success in this economic downturn.
Sidelining credit programs may come at serious cost; the “buy now, pay now” model might put immediate cash in your pocket, but severely narrows the B2B buyer field. In the UK, where 73% of businesses already use e-invoicing, reducing trade credit purchasing would prove limiting for many B2B buyers, especially those relying on credit to help keep them afloat. Prior to Covid-19, 50,000 small businesses in the UK shuttered every year due to cash flow problems3.
In a stable economy, offering payment on terms can improve customer loyalty and increase average order volume. However, as the spike in unpaid invoices indicates, in times of uncertainty, trade credit can introduce too much risk and lead to staggering bad debt. Despite its widespread use, many businesses have yet to establish a true credit management strategy and are especially vulnerable to periods of economic disruption.
How can SMEs continue to reap the benefits of trade credit during economic disruption? Outsource.
Credit as a Service® (CaaS) from MSTS, can have an immediate impact on cashflow, while streamlining back office processes and simplifying onboarding. Using CaaS, SME’s can offer white label trade credit to their customers, without assuming the receivables and credit risk, and get paid by MSTS in as little as two days. Moreover, CaaS effectively eliminates the need for trade credit insurance.
Read our trade credit white paper to learn more or schedule a demo to see how CaaS could work for your business.
3. Trade Credit, Who Really Wins White paper