Abstract
Every large or small enterprise needs to have financial liquidity and to be able to generate profits to develop. It is not important in which sector it operates, whether it is a private or public one, but profits and safety are two elements every enterprise is not able to function without. The low performance of these two measures can cause a number of difficulties for managers. To avoid this, leading companies, especially the smallest ones, should optimize the trade credit management policy. Most often, SMEs’ (small and medium-sized enterprises) owners try to work together as part of a group purchasing organization, which positively affects trade credit management. The aim of the paper is to present the trade credit management strategy in Polish group purchasing organizations during the COVID-19 pandemic. The study uses data on the construction sector because it is one of the most important segments of the Polish economy, which is financed to a large extent with trade credit. The paper indicates the mechanisms whose applications allowed SMEs operating in purchasing groups to change trade credit management strategies in such a way that these units could operate calmly and safely in the market. These changes could be observed in purchasing goods with a large reserve, strictly controlling all receivables, switching to cash sales or limiting sales on long-term trade credit. The analysis showed that enterprises changed trade credit management strategies from moderately conservative to highly conservative.
Highlights
In modern economic conditions, one can observe a tendency of enterprises to pay for goods with some delay
Purchasing for a trade credit represents a significant proportion of total sales, but this share often varies from country to country
This means that credit links between enterprises generate very rich network effects through which shocks spread to the economy [3], which can be considered a kind of imperfection resulting from the use of trade credit
Summary
One can observe a tendency of enterprises to pay for goods with some delay. One can notice a constant extension of payment deadlines for invoices, which is conducive to the development of credit purchases Such practices mean that a significant portion of the current assets of modern enterprises are in the form of receivables that arise from sales with a deferred payment. The literature indicates that trade credit makes the tightness of financial constraints change endogenously with the cash flow of those companies that are downstream. This means that credit links between enterprises generate very rich network effects through which shocks spread to the economy [3], which can be considered a kind of imperfection resulting from the use of trade credit. There are many methods of managing trade credit, from the appropriate maneuvering of the payment terms offered, to the possibility of using trade credit insurance offered by insurance companies operating in the country
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