How Trade Credit Insurance Can Help You Survive Increased Business Costs in 2024

 Discover how to safeguard your business from rising expenses with trade credit insurance, a shield against insolvency risks and late payments. 

Trade Credit

It’s difficult to predict whether the cost-of-living crisis will ease in 2024. However, the financial strain it has caused for businesses is set to rise, marked by escalating expenses, from energy bills to raw material prices. This hike in costs is contributing to a concerning spike in insolvency rates.

In November 2023, registered company insolvencies reached 2,466, a staggering 21% higher than the same month the previous year, surpassing levels seen during the government support measures in response to the COVID-19 pandemic.

Adding to this financial strain are rising interest rates, which now stand at 5.25% as the government attempts to control inflation. This has had a significant impact on borrowers seeking to make investments in their business, with most halting potential progress until interest rates decrease.

In this blog, our experts explore how businesses can manage their cash flow issues and utilise trade credit insurance to survive the economic turmoil predicted for 2024.

Navigating issues with cash flow

This inflation-driven surge in prices has a direct effect on business cash flow, often leading to delayed payments and other financial complications. A recent study revealed that 55% of SMEs have outstanding invoices from the 2022/2023 tax year.

The key to avoiding these cash-flow issues is for businesses to adopt proactive financial planning strategies.

It’s crucial to assess your business operation and identify areas where efficiencies can be made. A thorough understanding of business costs can help highlight areas for potential savings, such as balancing staff levels and reviewing energy costs and supply chains.

Preserving cash flow and budgeting for possible issues can provide a buffer against financial challenges.

The effect of unpredictable interest rate fluctuations on businesses

An additional consequence of inflation is that many businesses are adopting a cautious stance when it comes to committing to significant investment and growth, waiting for more favourable interest rates. Businesses that have previously taken on loans are now grappling with repayments, pushing them towards insolvency.

On the other side of the coin, those who are seeking to invest are struggling to secure the necessary funds as loan rejections become more commonplace. The result of this is that businesses are experiencing a lack of progress leading to significant underperformance.

How to protect your business with trade credit insurance

In the face of uncertain inflation rates and the persistent challenge of late payments, there are proactive steps businesses can take to reduce risks. One of the most effective solutions is trade credit insurance.

Since the cost-of-living crisis, credit terms offered to customers which allow them to pay for goods or services at a later date, are now at an increased risk of non-payment.

Trade credit insurance serves as a tool to mitigate risks, offering businesses a safety net against potential financial losses.

In the unfortunate event that a customer is unable to pay, the insurer steps in to cover a percentage of the outstanding debt, transferring the risk of non-payment to the insurance company. This not only provides financial stability but also offers peace of mind to businesses, allowing them to focus on growth without the constant worry of insolvency risks and delayed payments.

Safeguard your business in 2024 with trade credit solutions from PIB

The economic uncertainty of 2024 presents numerous risks to UK businesses.

Protecting your business as costs inflate has become a necessity, not a nice-to-have. Find out how tailored traded credit solutions from PIB Insurance can help position your business for resilience and sustainable growth in 2024.

Get in touch with our friendly team today. We’re on hand to answer any questions you may have about trade credit insurance, and can guide you towards the ideal solution to protect your business’ ongoing interests.

Contact the Trade Credit team at PIB