There plenty of challenges at the moment to SMEs, but one the major dangers comes from the global problems in the supply chain. This is largely down to the war in Ukraine and the resulting sanctions against Russia, but it isn’t a simple issue. How might this affect your business?
Challenges to the Global Supply Chain
The supply chain into the UK has suffered a series of blows over the past couple of years. The aftermath of Brexit has meant that many imports from Europe are getting held up for far longer than we’re used to, while the travel restrictions during the Covid pandemic affected the transport of goods as much as people.
Then, just as the problems from the pandemic, at least, were dying down, the war in Ukraine has created more supply chain issues. Besides imports from Ukraine itself being cut off, sanctions against Russia have removed a major trading partner.
What Effects Will Shortages Have on Your Business?
Shortages range from oil and gas to cereals, and metals to semiconductors, and many commodities have been subject to steep price rises. While these might not directly impact your business, they could affect you in several ways.
One is that you may trade with companies that depend on these supplies, making it harder for them to pay your invoices and risking liquidation. At the same time, the price rises, particularly of gas and oil, are likely to increase your overheads.
There’s also the wider danger of a collapse in consumer spending, which can affect businesses whether or not they trade directly with the general public. As Damien Dawson, Regional Manager at trade credit insurer Atradius, said, “Right now, we’re seeing huge consumer demand across the board which many businesses are struggling to keep up with. But as the cost-of-living increases and disposable income decreases for many of us, we may start to see a drop-off in demand.”
What Can You Do?
Seeing these global forces threatening our economy, it would be easy for SMEs to assume they’re powerless to ensure they don’t fall victim. In fact, while the world economy is obviously beyond your power to control, you’re very much in charge of how you respond to it.
SMEs that survive, or even thrive, in difficult economic times tend to be those who take the initiative to act creatively and flexibility, and who work hard on getting the basics right.
The inevitably includes having a robust credit control system in place. While you may need to write off a certain amount of bad debt from struggling customers, you can minimise this. You clearly need to actively chase unpaid invoices, but you also need to negotiate creatively to ensure that customers in difficulty are able to pay you as much as possible, as quickly as possible.
Give me a call if you want to discuss improving your credit control as a defence against the tough times coming.