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What will the recession mean for businesses and how can Kiistone help?

Updated: May 26, 2023

With financial institutions agreeing that the UK market will be in a recession by Christmas 2022, smart businesses have to look at ways to insulate themselves from its effects. The main being the uncertainty of income. Two main factors influencing this are: the potential for suppliers to fold, or customer’s changing circumstances meaning that they are unable to pay on time - or at all.

Most large businesses or large contractors will try and build-up cash reserves, to give them a buffer to see them through this period. The easiest way is to take longer to pay their subcontractors. The chain effect can be that if that subcontractor doesn’t have reserves of their own it puts them in a precarious position waiting on monies owed. Money placed in escrow ‘upfront’ is already ‘ringfenced’ so the main contractor has nothing to gain by withholding payments. You, the smaller business, can then deliver your service without the fear of not getting paid. It is important to remember that even businesses that have a long rapport with their clients are unprotected if they go bust. Money that is already ringfenced cannot be lost.

Having all your eggs in one basket, either with a single large client or a small pool of regulars means you are completely dependent on that revenue stream. A single large client can dictate fresh terms i.e refuse to buy if your rates aren’t lowered as they have the buying power.

Currently with utility bills at a record high and inflation rising, overheads both at home and in

work mean you need more money not less. If you find yourself in a survival position where you have to do what is necessary to pay a bill you will be wishing you had more guaranteed income. This is difficult when you work for yourself.

Kiistone’s method of staging upfront payments against delivering a quality service or product means that transactions are more transparent and controllable. If the client hasn’t placed their money in by a set point you can withhold delivery until it is. Withheld delivery, however, only benefits you in not losing money and setting an example that you expect timely payments. Survival and growth are dependent on income. Especially in difficult periods the need to diversify your client base is more critical than ever. More clients mean more revenue streams, less fragility and the opportunity to gain market share. Many strong companies in hard times increase their advertising budgets to take advantage of their competitors cutting back.

Gaining any new clients comes with a degree of risk as you have no relationship history with them. Will they be happy to pay a deposit as they may not trust you either? If you deliver without upfront payments, will they pay on time?

Trust and confidence are critical to building relationships. Kiistone can provide companies with a competitive advantage, as new clients can be reassured that their money is safe in escrow. For example; Yes, we take upfront payments like our competitors, however, your money is ringfenced for your security as we know we’ll deliver the standards you expect from us. Mutual security in volatile times is a win-win for everyone! During difficult periods you may see opportunities not only to gain clients, but to develop new services that you can offer. Thus, making them more loyal or likely to increase their spend with you. A prime example are the restaurants and pubs that offered take aways and delivery services during the Covid pandemic. Taking advantage of these may require more investment. Lenders are more likely to invest in your new ideas if your current situation is stable. Cashflow in terms of money already spent with suppliers, as we have agreed is no guarantee of income. However, they will have greater confidence knowing that if your cashflow is ringfenced it is safer to lend against.

Periods of uncertainty can now be looked upon as times of opportunity to not just to survive, but grow.

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