Credit Management March 2024

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Aggregate Industries partners with Barclaycard Payments to provide extended working capital to their clients Our new trade partner programme gives you a suite of solutions to help keep your business running smoothly. By partnering with us, your day-to-day cashflow could improve and your business can thrive, while our dedicated support and expertise puts you in complete control of your business payments. Aggregate Industries’ partnership with Barclaycard Payments has enabled us to increase our sales, whilst reducing our Days Sales Outstanding (DSO) and credit risk. Phil Rice Head of Credit – Aggregate Industries UK Ltd Customer satisfaction Being able to offer flexible and extended payment terms to customers can make you more attractive, especially if your competitors can’t match it. Our payment solutions help improve supply chain payments and embed relationships, creating value for both parties. Reduced risk We help remove the risk that you won’t receive payments. With quicker payments and our payment guarantee, you can be far more confident that whatever happens to your customer, you will receive the money you’re owed. Increased sales You might have wanted to sell more products and services to your customers in the past but were reluctant to take on the risk of extended credit terms. With Barclaycard taking the credit risk from you, and extending it through your customers, your sales could grow with reduced risk to your business. Quicker payments Waiting for and chasing outstanding payments can be frustrating, time- consuming and a financial drain. We can help make sure monies owed are paid to you more swiftly, giving you a better working capital position and a streamlined accounts receivable process. Find out how our solutions could benefit your business. Sign up for our trade partner programme today. Email mark.mcgill@barclaycard.co.uk Barclaycard is a trading name of Barclays Bank PLC and Barclaycard International Payments Limited. Barclays Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register number: 122702). Registered in England No. 1026167. Registered Office: 1 Churchill Place, London E14 5HP. Barclaycard International Payments Limited, trading as Barclaycard, is regulated by the Central Bank of Ireland. Registered Number: 316541. Registered Office: One Molesworth Street, Dublin 2, Ireland, D02 RF29. Directors: Paul Adams (British), Steven Lappin (British), James Kelly, Mary Lambkin Coyle, Peter Morris and David Rowe. Brave | Curious | Resilient / www.cicm.com / March 2024 / PAGE 32
INSOLVENCY APPLES AND ORANGES Finding the right comparisons when trying to predict future outcomes is key. BY GIUSEPPE PARLA THE Insolvency Service published the Insolvency Statistics for 2023 on 16 January 2024, providing us with a snapshot of the economy. So where did 2023 take us, and does the future have in store? Insolvencies for December 2023 remained static with only a two percent growth for the same month in the previous year. However, this statistic only provides us with part of the picture. If we compare this statistic to the 2019 figure, before the introduction of any Covid support measures, we see an increase of 46 percent in companies entering an insolvency process – whether that be a Creditors Voluntary Liquidation (“CVL”), a Compulsory Liquidation or others, such as an Administration or Company Voluntary Arrangement (“CVA”). Winding up petitions are on the up, with HMRC being the main petitioner – a clear demonstration that any patience they may have had, is now wearing thin. The majority of the insolvencies are CVLs, most of which are in the construction or hospitality sectors. What does this small yearon-year increase mean v the comparison to 2019? This demonstrates how significant the Government’s support schemes were during the pandemic and, now that the support has been removed, businesses that perhaps were in financial distress pre-pandemic, are now facing an inevitable – insolvency. We regularly hear the return of the term, ‘zombie company’, which by definition are companies that earn just enough money to continue operating and service debt but are unable to pay off their debt. How will these companies survive now that the Bank of England’s interest rates are no longer at a very low level? Inflation and bank base rates It has been largely publicised that the Government has been trying to bring inflation down to two percent - which at one point was over 10 percent. Their main tool for doing this was by increasing the bank base rate. This increase was paused at 5.25 percent whilst inflation had been dropping, but there was an unexpected increase in December 2023 that has made further economic predictions uncertain. There are many attributes that affect inflation, and the December increase could have been a blip meaning that the Government is still on course to achieve its aim of two percent. But when this will happen, and whether it will remain at this level, is anyone’s guess. Unemployment and job vacancies In 2023, it was widely reported that unemployment rates remained ‘down’, however, as the number of insolvencies increased, the number of job vacancies have inevitably reduced. Indeed, the Office for National Statistics reports that as of September 2023, vacancies were falling to similar levels recorded before the pandemic. If insolvencies stay at a two percent rate increase, then these unemployment figures are likely to rise further. Should we be concerned? We could be looking at a new Government in 2024, so understanding what they may bring is an article in itself. However, the short-term economic outlook remains uncertain and difficult to predict. The cost of living crisis poses more questions than answers. If bank base rates remain close to 5.25 percent, whilst this is good for savers, it will mean many businesses and individuals will be unable to afford loan repayments at the higher rate when their current deals expire – whether that be loans for property or any other assets. Some experts are suggesting that bank base rates may drop a little, but the days of two percent or below seem to be a distant memory that may not return any time soon. As credit managers, it is more important than ever to keep your communication lines open with your customers and if you are faced with an insolvency or a debt that is becoming difficult to recover, seek advice early to consider all your options fully. Author: Giuseppe Parla is a Business Recovery Director and Licensed Insolvency Practitioner at Menzies LLP. Brave | Curious | Resilient / www.cicm.com / March 2024 / PAGE 33
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