Trade credit management represents an important strategic opportunity for firms to enhance performance, liquidity and profitability. This paper synthesises existing understandings of trade credit, with particular (but not exclusive) reference to the UK, with a view to identifying a research agenda in this field. The size, macroeconomic significance, absence of regulation and presence of significant internal risk associated with trade credit suggest that such an enhanced meta-level understanding of this substantial financial market that shadows regular business-to-business operations is imperative. The paper synthesises what is known about the basic parameters of trade credit operations, suppliers' motivations and imperatives for granting credit to trade customers and the factors that determine credit periods and terms. We identify where further research would advance understanding in this area.

Purpose-The supply of trade credit by small-to medium-sized enterprises (SMEs) is the product of both customer demand and the possibility of strategic advantage, but is subject to risk. In the current financial climate the demand for trade credit may be heightened, leading to further increased risk. This paper seeks to evaluate current risk mitigation measures in the UK and considers how these might be improved. Design/methodology/approach-The supply of and demand for trade credit and the inherent risks are explained by reference to the literature. Then, using both the academic and grey literature and data from a large-scale questionnaire, the paper highlights the limitations of both regulatory and management approaches to mitigate the risks in the context of UK SMEs. Finally, the paper considers the prospects for improved management. Findings-Trade credit may be a product of market demand or a desire to extract strategic advantage. Both regulatory measures and internal management regimes have failed to mitigate risks in the UK for SMEs extending trade credit. Practical implications-The paper concludes that current UK regulatory regimes are unlikely to prove effective and that better management of trade credit may be imperilled by the power imbalances between SMEs and larger firms. The paper suggests areas for the improvement of trade credit management under the headings of policies, people, processes and practices within SMEs. Originality/value-The paper demonstrates why, despite the risk, UK SMEs offer trade credit and consider how those risks might be mitigated.

Purpose – This paper aims to explore the reasons for the apparent failure of many UK firms to achieve the competitive advantages indicated in largely positivist literature through the management of their trade credit positions. Design/methodology/approach – The paper utilises data from a set of semi-structured interviews with trade credit managers in firms and is the first substantial qualitative study of the intra-firm aspects of trade credit management in the UK. Through this approach, we explore the reasons why the theoretical promise of trade credit may or may not be realised. Findings – The principal findings relate to the importance of three organisational attributes (skills/awareness, communication and structural position of the activity in the firm). That is, trade credit management should be regarded as a relational activity and not merely a narrow technical function. The paper finds that there is no generic formulation of these attributes that can deliver on the promise of trade credit identified in the extant literature. Rather, individual firms must adapt themselves to suit their circumstances. Practical implications – This paper will be of interest to and is relevant for companies, accounting professionals and policymakers. Trade credit represents a significant area of commercial risk, and the problems experienced with its effective management have previously proved somewhat intractable. Originality/value – This paper reports on the first substantial piece of UK work to look at the actualities of how trade credit is managed within firms and what the implications of this are.

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