In a world where little can be certain, businesses must do all they can to prepare for and protect from unexpected events.
If we have learnt anything at all since the turn of the century, it is that not all growth is good. In difficult times, businesses must be sure that they have a strong business model and sustainable cash flow.
When a company grows too fast it can encounter problems with suppliers; systems and processes may not be able to keep up; there may not be enough personnel either within the company or available for hire. The challenges vary across sector and geography, but one commonality is that if growth is not well managed it may bring the company down.
The last two decades have brought unprecedented technological advances and fundamental systemic change, much for the good, yet the impact from financial crises and the recent Covid-19 pandemic show how vulnerable individuals and companies are on a global scale.
It is all too recently that we have seen the disruption a worldwide crisis brings to businesses both small and large. Supply chains have been interrupted, employees have been unable to get to work, frontline services have been all but exhausted and the risk of insolvencies increased significantly.
In these challenging times all businesses, but particularly those whose order book is dominated by a handful of clients, need confidence they can not only survive but grow without leaving themselves exposed to events that are beyond their control.
Businesses must know that their largest clients are not going to be dragged under by the latest crisis, taking their own operation down with it. Yet, if businesses are overly cautious, fearful of the worst, they might refuse to extend credit to those clients who have the potential to deliver important revenue streams for the future.
Clearly then, companies need to be sure that they can extend credit to key clients; that invoices will be paid on time; and that cash flow will be reliable. Ultimately businesses need to be able to capitalise on growth of their clients in a sustainable and secure way.
Trade credit insurance is one way of not only giving peace of mind should the worst happen, and a company defaults that cash flows will not be disrupted. Yet it is much more than risk management. Trade credit insurance can provide unique support to companies as they grow.