DON’T PILE UP PROBLEMS

Politics affects business whether we like it or not. Many have tried to turn a blind eye (and ear) away from the ‘B word’, Brexit, but there are some key considerations to remember when it comes to the supply of items and the subsequent credit management.

In various industries there has been talk of contingency measures being taken to perhaps mitigate potential supply problems from March. One of the measures being talked about in the merchandising world, in particular is the method of increased stockholding or stock piling.

Pile it high

The likelihood is this will have a greater bearing on the supply of goods or items, such as a distributor ordering ten times as many cups that are manufactured in France, just in case there are increased import duties on shipments post Brexit.

However, there could be occasions where Brexit could have a direct effect on the service industry too. For example, should the price of paper increase, will this have a bearing on training companies that produce handouts of their presentations?

There may be some who will adopt the mantra ‘make hay while the sun shines’ but we must all be aware of the risks that increased stockholding may bring.

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?

Demand issues

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?

There are a few key principles as to how to mitigate invoice exposure and risk and we’ve covered some of them previously in our past articles. You can also learn more through simply visiting our website www.accountassyst.com.

For further advice and guidance as to how to avoid Brexit affecting your credit control procedures, as well as any other discussion with regards to risk and recoveries in general, then please don’t hesitate to contact us, your approved BPMA credit management provider today. We’re always there to lend a hand.