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Economic uncertainty, persistent inflation, and cautious consumer spending have created a challenging environment. Across the country, small and medium-sized enterprises (SMEs) are finding it increasingly difficult to secure timely payments, making it more important than ever to balance automation with personal engagement.
Rising bad debt
According to the Department for Business and Trade, late payments cost the UK economy nearly £11 billion each year, with more than £26 billion owed in outstanding invoices.
Recent small business surveys show that UK SMEs are now owed an average of £21,400 each in late invoices, up from roughly £17,000 the year before. Around 45% of invoices issued by small businesses during the second quarter of 2025 were paid late.
This growing backlog has pushed up average Days Sales Outstanding (DSO) to about 52 days, compared with 44 days in 2023. For many firms, that extra week can severely restrict cash flow, especially amid high borrowing costs.
The credit control challenge
Credit control has long been central to business resilience, but its methods are evolving. Once reliant on spreadsheets and persistence, it now combines technology with human judgement.
Automation and artificial intelligence are helping finance teams handle collections more efficiently. Modern systems can analyse payment patterns, send reminders automatically, and flag customers showing early signs of risk. These tools save time on routine tasks and improve visibility of cash flow.
However, while technology brings speed and accuracy, it cannot replace the trust built through personal contact. As one credit manager observed, “AI can show you who is likely to pay late, but only people can persuade them to pay sooner.”
Successful credit control depends on relationships as much as data. The most effective teams use automation to identify where attention is needed but rely on experienced professionals to make the calls, hold conversations, and find solutions that protect both cash flow and customer relationships.
Debt recovery: a personal approach
Even with strong credit control, some debts become overdue or disputed. At that stage, firms often engage external recovery support; a step that, when handled correctly, can protect cash, and preserve client goodwill.
Industry data suggests that some professional recovery services in the UK achieve success rates of more than 80% for uncontested commercial debts. These results highlight the value of specialist expertise, structured processes, and skilled negotiation.
Yet recovery remains as much an art as a science. Each case requires a tailored approach: assessing whether a debtor is struggling, unwilling, or simply disorganised, and choosing the right route from amicable settlement to formal legal action, if necessary.
Many recovery professionals emphasise that empathy and communication are crucial. An understanding conversation often achieves faster and more cost-effective results than confrontation. The best outcomes not only secure payment but also maintain relationships, allowing businesses to continue trading once issues are resolved.
Strengthening credit strategies
Across all sectors, businesses are placing greater focus on cash management and credit strategy. High interest rates, rising costs, and persistent late payments have made working capital discipline a top priority.
Finance leaders are focusing on three key actions:
- Tightening credit policies and reviewing DSO trends.
- Using technology to predict risk and manage reminders more efficiently.
- Escalating recovery efforts earlier to avoid uncollectable debts.
According to a 2025 national payment survey, nine in ten British businesses experienced late payments in the past year, and 44% said delays are becoming more frequent. With inflation easing only gradually and borrowing costs remaining high, cash flow pressures are likely to persist.
A human future for credit management
While automation is transforming credit control, experts agree that empathy and experience remain central to effective results. Technology can support decision-making, highlight trends, and remove administrative burdens, but it cannot replace the understanding and judgement of people managing real relationships.
Bad debt will always present a risk, but proactive, intelligent credit control, supported by informed recovery decisions, can significantly reduce exposure and build resilience.
In a period where every penny counts, the message for UK businesses is clear: technology may enhance the process, but people will always close the deal.
For expert help with debt recovery, contact one of our experts today by email or call +44(0)3333 231580.