Politics!! – It affects business whether we like it or not.
Many have tried to turn a blind eye (and ear) away from the ‘B word’ or Brexit!
However, there are some key considerations to remember when it comes to supply and the subsequent credit management.
In various industries there is talk of contingency measures being taken, to mitigate potential supply problems from March. One of the measures being banded about is ‘stockpiling’.
Typically, this will have a greater impact on the supply of goods but service industries may experience issues too. For example if paper prices increase, this would have a bearing on printers, training companies e.t.c. having a domino effect.
Now there may be some whom will live with the mantra… ‘make hay whilst the suns shines’ but we must all be aware of the risks that increased stockholding could bring and have contingency plans:
- You’ve carefully vetted and checked your customers and have determined a credit limit that both you, ‘the Supplier’ and the client, ‘the Buyer’ are comfortable with. Should the Buyer suddenly exceed this limit, without the guarantee of a pending order to fund the increased spend, are they going to be able to clear the larger supply invoice ?
- So the Buyer has a warehouse full of stock ‘just in case’ but a larger stockholding is not a pre-cursor of larger revenue. In fact, it could lead to quite the opposite. Should there not be an increased demand for items, the Buyer may be forced to sell at a lesser price, which leads to lesser revenues, a squeeze on their cash-flow and decisions as to which Suppliers to pay.
- Finally let’s not forget the possible issues the Supplier may face with stockholding. The costs to any Supplier in fulfilling a larger Buyer’s order obviously increase. The question any supplier should ask is… can I afford to invest in fulfilling this new order and if so, how can I mitigate the exposure and risk of the costs for same ?
There are a few key principals as to how to mitigate invoice exposure and risk, we’ve covered them previously in both our past articles and on our various website blogs such as ‘The Ten Commandments’
If you want to know more, then contact our team today.