Another tough year for receivables finance

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As fears over rising levels of customer vulnerability and fraud increasingly turn to reality, Andrea Tanner reports on key developments to look out for in 2023 – as well as signs of hope, and how we might be able to help.

Fraud set to increase, despite dip in inflation

The writing has been on the wall for some time, and the anecdotal evidence across our network is that many of the recent warnings about increased threats of fraud and client failure are now materialising. Combine that with the economic pressures that have forced many clients to reduce the size of their receivables teams, and it points to another tricky year ahead.

But while the Ukraine war rumbles on, spreading ripples of economic disruption across the globe, and UK businesses struggle with inflation and the energy crisis, there are some signs of hope. The UK economy has, for now at least, defied expectations that it will slip into recession – although it is teetering on the edge. And following last week’s slight dip in the UK inflation rate, the belief of Andrew Bailey, Governor of the Bank of England, is that we have “turned a corner” and that the rate may drop “quite rapidly this year.”

That’s clearly good news, but for many UK businesses already in a tailspin after three years of economic turmoil and the withdrawal of the Government’s COVID-19 support, it may be too late. Indeed as we proceed through 2023, we expect to see opportunistic manipulation and fraud continue to increase. And as we saw last year, credit insurers and bad debt protection providers are likely to make substantial cuts to credit limits when business client failure accelerates at short notice. This in turn could lead to clients resorting to desperate measures to ensure that their employees and creditors are paid. On top of that, we’re hearing that HMRC is very much back on the front foot in terms of demanding overdue PAYE/VAT arrears, which is understandable given the national deficit, but clearly another squeeze on businesses in difficulty.

Key metrics

In terms of key metrics to track, we are again likely to see DSO and Cash Turns increase due to the knock-on effect of increased creditor pressure from inflation. That rise means that funds in use are likely to increase too, and invoices are more likely to become ineligible, causing funding and subsequent cashflow issues for affected clients.

Also, as with the last three years, sales will continue to differ from what was once typically expected from each client. End-consumers may have emerged from lockdown, but the supply chain and cost-of-living crises continue to disrupt.

We can help

Do remember, we are here to help. If you are a client, please reach out to your account manager for any assistance configuring Lenvi Riskfactor to ensure that it’s highlighting risks before it’s too late. We can also provide additional training, particularly for RMs who are relatively new or have not managed difficult economic scenarios before.

Find out more about Lenvi Riskfactor

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