COVID exposes credit management lessons with unpaid invoice spike

We are all hoping that the worst of the pandemic is now behind us – and business leaders can begin to evaluate how they can make themselves less financially vulnerable in the future. 

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 analysed 27 million invoices accounting for more than $54 billion in B2B transactions across Europe. The UK wasn’t the only country to feel the cashflow crunch.  French businesses saw unpaid invoices increase by 72% compared to pre-COVID rates. Europe saw an overall increase of 82.7% since the pandemic.  

With such a huge credit shadow hanging over so many businesses, the need for a credit management strategy could be key to not only surviving an economic downturn, but also help manage cashflow when trading times are less volatile.  Prior to Covid-19, 50,000 small businesses in the UK shuttered every year due to cash flow problems³.  SMEs are finding a solution with outsourced trade credit. 

While the usual “buy now, pay now” terms might put immediate cash in your pocket, it is not in step with payment convenience and flexibility that we expect when making purchases as consumers. 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.   

In a stable economy, offering payment 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.  

SMEs can reap the benefits of offering trade credit while removing the risk by outsourcing it to a specialist. TreviPay enables SMEs to offer white label trade credit to their customers without assuming the receivables and credit risk. TreviPay effectively eliminates the need for trade credit insurance. Customers get paid by TreviPay in as little as two days, meaning the impact on cashflow is immediate.  

Read our trade credit white paper to learn more or schedule a demo to see how TreviPay could work for your business.   

End Notes

3. Trade Credit, Who Really Wins White paper