The healthcare sector is poised for continued transformation driven by several key factors. These factors include:
- The evolution of innovative technologies. The Digital Health market in the UK is estimated to reach $4.68 billion by 2025.1
- An ageing population. The UK's population aged 65 and over is expected to increase by 8.6 million by 2050. This indicates the potential for increased healthcare demand.
- Persistent economic uncertainty. GDP growth rate of 0.4% in 2023 is expected to drop to 0.3% in 2024 and increase only slightly to 0.7% in 2025.2
These factors present challenges for the healthcare industry. However, they also create promising opportunities. The industry is expected to grow by 2.8% annually from 2020 to 2025.1
To navigate this evolving landscape, businesses in the healthcare sector may increasingly rely on trade credit as a crucial financial tool. This approach will help them manage cash flow. It will also sustain growth in uncertain economic times.
Driving change in health and care
One of the most influential drivers of change is artificial intelligence (AI). From AI's emergence is at the forefront of many sectors, including healthcare. It is revolutionising drug development and patient care. Additionally, it is transforming the business and commercial aspects of healthcare.
The UK Government is investing £100 million to speed up the use of AI in life sciences to tackle the most significant health challenges. This will target areas where the rapid deployment of AI has the greatest potential. It aims to create transformational breakthroughs in treatments for previously incurable diseases.3
Equally powerful is the shift toward prioritising preventive over reactive healthcare. This strategic shift aims to mitigate the strain an ageing population could place on healthcare systems worldwide. It offers a more proactive approach to managing the evolving healthcare needs of society.4
As the demand for healthcare services continues to rise, so does the need for sustainable growth. There is also a growing need for innovation within this sector. One essential but often overlooked factor contributing to the growth of healthcare organisations is trade credit.
The role of trade credit in health and care
Trade credit is a financial arrangement in which suppliers extend credit to their customers. This allows customers to buy goods or services with delayed payment terms.
Trade credit is crucial in the health and care sector for several reasons.
1. Ensuring uninterrupted healthcare services
Hospitals, clinics, and long-term care facilities need constant:
- medical equipment;
- pharmaceuticals;
- and other essential supplies to provide high-quality care.
Many of these items come with substantial price tags. Trade credit enables these organisations to get the necessary supplies without immediate cash payments. This ensures the uninterrupted delivery of healthcare services.
2. Fostering collaboration in the supply chain
Moreover, trade credit promotes collaboration within the healthcare supply chain. Suppliers can offer favourable credit terms to customers to encourage long-term relationships and reliable partnerships.
This collaboration fosters innovation and efficiency as suppliers work closely with healthcare providers to meet their unique needs. This can lead to cost reductions and improved quality of care.
3. Adapting to challenges in the healthcare sector
The healthcare sector faces constant challenges, including:
- changes in patient demand;
- evolving regulatory requirements;
- and advancements in medical technology.
Trade credit provides healthcare organisations with the flexibility to adapt to these challenges. It allows them to strategically allocate their financial resources. This could be investing in new medical equipment, expanding facilities, or adjusting staffing levels. This adaptability is crucial for maintaining resilience and growth.
4. Supporting research and development
Additionally, trade credit supports research and development in the health and care sector. This helps to advance medical science and improve patient care. Many medical innovations and breakthroughs need substantial investments in:
- equipment;
- materials;
- and clinical trials.
Trade credit allows research institutions and pharmaceutical companies to access these resources on credit terms. This facilitates the development of new treatments, medications, and medical devices.
Protecting your business
Trade credit insurance helps safeguard you against the financial risks associated with non-payment of invoices provided on a credit basis by customers or partners. In this sector, where services and supplies are critical, delayed or defaulted payments can:
- disrupt your business operations;
- compromise patient care;
- and strain resources.
However, it doesn't only help you operate when another company can't pay due to insolvency or lack of funds. It can also accelerate your business growth by safeguarding your cash flow. Plus, it could help you to succeed when operating with unfamiliar customers.
This insurance doesn't just protect your finances. It also gives banks and business partners peace of mind, knowing loans will be paid despite supply chain issues.
Plus, with this insurance, you can offer loyal customers credit terms while keeping an eye on any insolvency risks. When it comes to new customers, you can confidently approach them. And they won't have to lose sleep over late payments or insolvency concerns.
Insolvency threats and dealing with unpaid invoices
Non-payments and delays can have a massive impact on your cash flow and business operations. This situation could put your business at risk in an industry where reliability and uninterrupted care are paramount.
The Department for Business and Trade5 estimates between 2020 and 2023, the business population decreased by 425,000 (7.1%). According to official data, there were 6,208 company insolvencies registered in England and Wales between July 1, 2023.5
Trade credit insurance provides a safety net by covering losses due to:
- insolvency;
- payment defaults;
- or political events.
It allows health and care organisations to ensure continuous service delivery and maintain financial stability. Additionally, they can invest in vital resources without fear of financial setbacks.
Takeaways
Trade credit insurance offers distinct benefits. Particularly in the areas of risk mitigation, growth, and enhancing working capital. In summary, for businesses in the health and care sector.
1. Risk Mitigation
- Helps protect businesses against the default of their customers, reducing the risk of non-payment.
- Can enhance credit management by offering insights into the creditworthiness of potential customers.
2. Growth
- Can facilitate business expansion by enabling companies to safely offer more competitive credit terms to new and existing customers.
- It can increase confidence in exploring new markets or expanding the customer base. This is achieved without fear of significant financial loss.
- Helps secure better financing terms from banks. As insured receivables are often viewed as more secure collateral.
3. Enhancing working capital
- Helps improve cash flow by protecting against late or non-payment. Ensuring more predictable income streams.
- Can lead to improved borrowing terms, as lenders may view businesses with insured receivables as lower risk.
- Allows businesses to release capital as a buffer against bad debts. Reallocating resources for growth and operational needs.
What you can do
We can organise trade credit insurance cover that suits your health and care business.
For more information about trade credit insurance, visit our trade credit page.
Sources
1. zipdo.co/statistics/uk-healthcare-market-size
2. britishchambers.org.uk/bcc-economic-forecast-fragile-economy-stuck-in-first-gear
3. gov.uk/new-100-million-fund-to-capitalise-on-ais-game-changing-potential-in-life-sciences-and-healthcare
4. nationalhealthexecutive.com/growing-role-preventative-healthcare-reducing-nhs-use
5. gov.uk/business-population-estimates-for-the-uk-and-regions-2023-statistical-release
