Potentially leading to greater investment in credit risk management tools

18 September , 2014 – London, UK - Tinubu Square, the trusted source of credit risk solutions for trade credit insurers and businesses, has carried out independent research amongst credit managers in the UK that clearly demonstrates an improved financial outlook for businesses for the second half of 2014.

The poll revealed that 60% of credit managers interviewed anticipated improvements in their cash flow situation now that the UK economy is improving. 54% said that they envisaged a change in the credit period taken by their customers in the current year, whilst 43% felt that it would remain the same. Only a quarter reported that the value of their bad debt had increased over the past year, whilst the rest said it had gone down or stayed the same.

In terms of investment in credit management, just over one third of those polled thought it was on the cards this year and that the investment would be split equally between staff and systems.

“The majority (73%) of credit managers polled worked in businesses with more than 200 people, indeed 32% of them were in organisations with more than 1000 employees,” said Mike Feldwick, Head of UK and Ireland, Tinubu Square. “The indication is that at the top end of the SME market and at enterprise level, there is a positive view that cash flow is improving and that this will lead to better systems and more help in the finance department. This is good news given that just under half of those polled said that they were not receiving credit risk information in real time, and 11% were waiting up to one week.”

The positive outlook is also reflected in the most recent Credit Managers Index[1], published by the Institute of Credit Management and sponsored by Tinubu Square. The Index for Q2 2014, shows that actual levels of business are increasing and companies are demonstrating a broader appetite for risk. The headline index that has been on an upward trajectory for the last six quarters now stands at 59.2 – more than 10 points up on the low of September 2012.

Mirroring other research, such as the Purchasing Managers’ Index for construction[2], the Index notes a further improvement in services and a slight dip in manufacturing but with both areas remaining healthy. New applications for credit have risen to a high of 67.2, although order book levels have fallen possibly due to the trend for longer term contracts to impact the figures, suggests ICM.

There is an increase in the number of rejected credit applications reflecting the rise in requests, but combined with an increase in bad debt provision, the figures suggest that the appetite for risk is becoming significantly stronger; this indicates confidence amongst business owners about their future prosperity.

“The research is heartening,” commented Mike Feldwick. “However, we should still be cautious because our economy is not immune to the effects of changing geopolitical and global market uncertainty, particularly in the Eurozone. Improvements in cash flow and a steady balance sheet will certainly aid investment in tools such as automated credit risk management software, which will enable companies to make informed decisions moving forward.”

[1] ICM (2014), « ICM UK Credit Managers’ Index », available at : http://www.icm.org.uk/resources/credit-management-index/
[2] Markit (2014), « Markit/CIPS UK Construction PMI », available at : http://www.markiteconomics.com/Survey/PressRelease.mvc/dd314c9b7f9c4e11a8659c4e7279b2d7