Unlike Tesco some companies couldn’t ride out a £6 billion loss. Make sure you know the ones who can and protect yourself from those who can’t!

The staggering amounts involved in the Tesco losses serve as a timely reminder that even blue chips can produce red numbers.

In the years following the global economic crash we’ve seen several well-known high street names go to the wall. Some have even risen from the flames only to fail again. Up until the Tesco announcement the largest UK corporate loss was by a bank, and one only saved from the abyss by taxpayer bailouts.

In a world where the rules of credit seemed to have been turned upside down it’s not surprising that for a great number of businesses, deciding on who to sell to has tuned into a game of Russian roulette.

Credit where credit’s due

Keeping a constant eye on the creditworthiness of customers can be a time consuming and costly exercise for small and medium sized businesses but in uncertain times it’s something you ignore at your peril.

Luckily this aspect of business management can be economically outsourced to people whose business it is to do just that. Furthermore they will underwrite the risk where appropriate meaning that whatever the state of the customers finances, invoices will be paid.

And there’s more

Interestingly, some of the public reaction to the Tesco disaster has been one of “serves them right”. It seems that the goodwill built up over many years has now been eroded by stories of less than transparent consumer offers and a penchant for making smaller suppliers sweat over payment of their invoices.

Lengthy payment terms only benefit the buyer, putting a tight squeeze on the margins of suppliers and making cashflow forecasting even more of a headache. The good news for those suffering at the hands of a customer with short arms and deep pockets is that you can link bad debt protectionto an invoice finance facility.

The cover-all beauty of this arrangement means that business owners no longer have to worry about when or if they’ll get paid; they can not only be certain of payment, they can have it within 24 hours of raising their invoice.

Empty your in tray

Outsourcing business headaches is becoming increasingly popular with SME’s. Indeed a recent survey revealed that 75% of those surveyed would like to spend more time growing their business than overseeing administrative tasks. It goes on to say that freeing up small business leaders from admin could boost the UK economy by £4.7billion.

Not quite the up to the amount of the Tesco write off, but every little helps!

by Steve Leeves