As world economies err towards a global recession and geopolitical tensions are on the rise, financial risk management will be a focal point on every decision-maker’s agenda. Freight forwards are in no way immune to the current market conditions and we are ever more conscious of our trading risk and day-to-day exposure. It is for this reason that we rely heavily on our underwriters and insurance consultants to help us mitigate those risks.
Prestige Credit have been our partners in this area for many years and felt it would be a great opportunity for us to give our customers some insight into their views on the world market and what financial information underwriters require to grant credit cover. Paul Jooste is a seasoned expert in his field and I’m sure you will find his review insightful and informative regardless of your industry. And should you ever need to credit insure your book, we highly recommend and endorse Prestige Credit as underwriting consultants.
Kind Regards
NICHOLAS BROWNE
Financial Manager
SCT SUPPLY CHAIN SOLUTIONS (PTY) LTD

Supplier side and credit limit management
What we need to do to secure our supplies and credit.
In these times of difficult economic conditions and extreme supply side turmoil, we find that clients don’t have the ability to rely on suppliers to keep stock on their behalf. The old way of managing stock “just in time” is no longer relevant and businesses need to invest in stock and supplier side management processes. Logistical delays due to fewer operators, natural disasters, and the impact of Covid, have changed and impacted supplies, together with the onset of the Russian Ukraine war has exacerbated the problem. The area of supplier side management has therefore become critical in the survival of many businesses and needs to be addressed to set the tone for the foreseeable future.
We don’t believe that this issue will dissipate in the near future, and is an element of business that owners and management need to address urgently. He who has stock is the one who dictates terms, prices and gains more clients. This has a direct impact on the business bottom line and future viability. How can we manage this area of the business to create more value, not just for the business but for clients as well?
Specific areas to focus on:
- Make sure you know the price of your product today and tomorrow. Price increases affect us all, and the management of this must be considered in the supply side as well. If I can buy now while the conditions allow, we could secure better margins on our products.
- Import and freight costs have escalated in disproportionate levels as a proportion of the product’s cost – and this is impacting the cost of the final product to consumers. The Ukraine war has escalated pricing on goods, that are classified as dangerous goods, to extreme levels. It is important to not only consider the cost of the container but also the size of the order to be imported. Sometimes it is more cost effective to import in larger volume and spread the cost of transport over more products than a small batch that will cost as much to import and transport.
- Lead times due to delays in manufacturing, raw material shortages, closed ports, fewer ships and containers are all impacting the time it takes to receive ordered stock. Preparing for time delays are therefore vital in the supply side management.
What can we do to support our supply side management?
- Dedicate specific resources to this process including staff, money and time.
- Find the right partners that understand your business and its challenges.
- Speak to your suppliers and understand the difficulties they face.
- Speak to transport and logistics partners and understand what they see and anticipate in the next month, three months and even six months.
- Work closely with your clearing agent to secure shipping slots.
- Speak to suppliers about the possibility to increase the existing credit line on the back of price increases.
How can credit limit exposure be better managed?
There are only a few trade credit insurers in the world, and they can only accept so much cover on any debtor as its financial ability allows. Even locally there are only a few trade credit insurers. We are seeing that more and more clients looking toward trade credit insurance to secure their businesses against bad debt due to non-payment, business rescue and liquidation. Even if a supplier is not insured, they are going to request relevant information to base their decision on whether to provide credit. No longer can a business depend on historical relationships. The world has changed and so has business. Information is used and needed to make decisions. Any financial institution would require sight of the latest financial information to extend credit, why do we expect our suppliers to be different?
Businesses therefore need to ensure that they have the following information prepared to ensure productive and positive discussions with suppliers or providers of trade credit insurance when requesting increases.
- Your last audited year-end financial statements.
- Your latest management accounts.
- Notes and explanations for the current period and what is expected for the business in the next 6 to 12 months.
- Even if losses are made in a particular period, explaining them may help give the supplier comfort and provide insight to what the business are doing to correct this.
- Has the business maintained a good payment history with the supplier showing consistent payments of due amounts on the terms agreed.
The last thing you want to do is to refuse sight or access to financial information. We do understand that this information is confidential and that it may not be allowed to be seen externally to the business, but there are different ways to deal with this and most suppliers and trade credit providers have processes to overcome this e.g. buyer visits or signing non-disclosure agreements. Plainly refusing to provide information will create suspicion and hints to a position that is not transparent and normally indicated the possibility of an unsustainable business. You depend on your suppliers to provide credit to your business, therefore you also need to ensure that you provide them with the comfort that the risks they are taking on your business are secure and safe.
As a credit supplier, we also need to look at the existing credit limits we have in place and how we manage these. As previously mentioned, there are just a few trade credit insurers in SA and they can only grant a limited value of cover on insured debtors. Therefore, if cover has been granted by one insurers and it is not utilised, it should be cancelled to free up capacity for other suppliers wanting cover. It is very important for a business to manage their credit lines and to ensure that credit lines are optimised for the supplier that can provide supplies and not utilized by suppliers that cannot supply goods or services.
Paul Jooste
Director (Authorised Representative)

Phone:+27 (0)11 805 8958
Mobile: +27 (0)83 457 7519
Fax: +27 (0)86 615 1473
Email: paul@prestigecredit.co.za
Website: www.prestigecredit.co.za
