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Weathering The Perfect Storm: How To Boost Growth In 2024

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Weathering The Perfect Storm: How To Boost Growth In 2024

Weathering The Perfect Storm: How To Boost Growth In 2024
January 12
10:45 2024

Earlier this year, the Scottish Government published its long-term food and drink stability strategy, which aims for a 25% increase in turnover for Scotland’s F&B sector by 2028. In addition to industry investment, the Government has pledged £5m to the cause in the hope that the sector will grow at a faster rate than similarly sized competitors such as Ireland or Norway.

In the background, many experts have described the industry as being hit by the perfect storm of business pressures, including the cost of living crisis, the fallout of COVID-19 and the impact of Brexit. Although state investment is a welcome contribution, a number of businesses will be wondering what else they can do to stimulate growth and boost revenue in 2024.

Fortunately, the sector is currently undergoing a digital transformation, which itself provides opportunities for buyers and sellers to utilise tech and protect themselves against this uncertain backdrop.

In order to capture a share of the e-commerce expansion, F&B sellers in all markets need to establish an online presence while providing restaurants, hotels, caterers and other buyers with the purchasing experience they expect. Notably, this includes offering industry-standard payment terms of 30 days or more to enable businesses to take advantage of increased liquidity, improved customer loyalty and enhanced quality control.

Increased liquidity is the key to survival

In general, F&B businesses are required to pay for ingredients or materials before they’re able to sell their final product and so are consequently forced to transact within very thin margins and so when changes in market conditions such as COVID-19 or the cost of living crisis kick in, it can have a dramatic effect on operators within the sector. As a result of these market conditions, businesses are struggling to keep on top of their outgoings. Insurance firm Atradius recently identified a 79% increase in food industry B2B invoices paid late or not at all in 2022.

Consequently, it’s more important than ever for F&B businesses to increase their liquidity. Fortunately, trade credit offers much-needed flexibility to the sector, and so improved payment terms allow B2B buyers to defer the payment of their purchase, giving them the opportunity to cash in on their purchases before payment.

When a buyer chooses to pay on terms, sellers receive payment upon delivery of goods and so they no longer have to wait 30 days or more to be paid. For businesses operating within thin margins, this could be the difference between those that make it and those that don’t.

Squeezed liquidity is part and parcel of operating in this sector.

Improved quality control boosts loyalty

One of the greatest difficulties – and risks – for food and drink businesses is handling the trade of perishable foods as they require specific attention to quality control, storage, refrigeration and transportation. In short, mishandling them could pose a significant health risk and damage to reputation.

Fortunately, when payment terms are offered to customers, funds are automatically reserved to pay sellers – and the seller can choose when they are unlocked. Paying sellers upon receipt of goods allows buyers to raise any issues before the seller gets paid. Meanwhile, the seller gets paid faster than if offering 30- or 60-day terms themselves. This additional level of quality control instils confidence in your customers and shows them that you trust the quality of your products.

Adopting financial innovations gives your business a competitive advantage

Adding innovative tech practices to your business can help you stand out from the crowd; instant, flexible payment terms improve the customer experience and encourage repeat business.

When it comes down to it, securing and retaining new customers is crucial in this industry, so it’s important to adopt features that make your offering unique and desirable. Providing customers with the option to pay later has been proven to increase conversion rate by up to 40% in the B2B segment and demonstrates the significance of adopting innovative tech for business survival. In fact, 60% of B2B transactions take place via trade credit.

Ultimately, failing to offer payment terms could deter customers from using your business as a supplier altogether.

Louis Carbonnier is co-founder and President of Hokodo, the Buy Now, Pay Later Digital Credit specialists.

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Catering Scotland

Catering Scotland

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