For creditors, taking proactive steps to mitigate the risks of late payments or debt defaults has never been more critical.
The cost-of-living crisis has firmly evolved into a long-term cost-of-doing-business challenge. According to the Office for National Statistics (ONS), While input price inflation has eased from its record peak of 19.2% year-on-year in March 2022, businesses are still contending with elevated costs for energy, raw materials and labour, making profitability and cash flow management more challenging than ever.
Economic Pressures Are Mounting
From energy bills and food prices to logistics and raw materials, rising costs are impacting every sector of the economy. Recent data highlights the intensity of these pressures:
Core inflation continues to challenge household budgets, with wages often failing to keep pace. In addition, business costs are surging. According to Statista, in December 2024 the core inflation rate stood at 3.2%, reflecting persistent underlying price pressures.
This dual financial strain is affecting both consumers and businesses, creating a ripple effect for creditors. As financial pressures mount, the risk of late payments rises accordingly.
Borrowing on the Rise
To cope with these challenges, many businesses and individuals are turning to additional borrowing. The EY ITEM Club forecasts that total bank lending to UK households and businesses will grow by 3.7% in 2025, up from 2.6% in 2024.
In sectors such as construction and manufacturing, rising operating costs and supply chain disruptions are further causing financial stress. For creditors, this creates a heightened risk of overdue invoices and unpaid debts.
As debt levels rise, creditors face several challenges:
Delayed Payments: Debtors often prioritise more urgent obligations, leaving your invoices unpaid.
Cash Flow Disruptions: Late payments regularly impact business’ ability to meet operational costs or invest in business growth.
Increased Risk of Default: Some customers may find themselves unable to meet their financial commitments, necessitating legal action to recover funds.
How Creditors Can Mitigate Risk
In this volatile environment, staying proactive is essential. Here are practical steps creditors can take:
Strengthen Credit Control Procedures
Ensure invoices and payment reminders are sent promptly. Monitor debtor payment patterns for early signs of trouble.
Stay in Communication
Maintain open lines of communication with your debtors. This helps you assess their financial position and demonstrate your willingness to work towards a solution.
Partner with Redwood Collections
Engaging a professional debt collection agency early can improve your chances of recovering unpaid debts. Agencies like ours can help you prioritise your invoices and recover funds efficiently, maintaining professionalism to protect client relationships.
Redwood Collections: Your Winning Edge
At Redwood Collections, we go beyond just debt recovery - we’re your partner in overcoming unpaid debts. In today’s economic environment, success means maintaining healthy cash flow, protecting your reputation, and staying focused on what truly matters: the strength of your business.
Here’s why businesses choose Redwood as their ally in the pursuit of success:
Strategic Debt Recovery for the Win: Whether it’s early-stage credit control or navigating complex legal recoveries, our tailored strategies are designed to secure your victory with every case.
Winning Track Record Across Sectors: From SMEs and multinational corporations to independent schools, our expertise spans industries, delivering results that drive success.
A Partner Invested in Your Success: We’re focused on outcomes that don’t just recover debts but solidify your financial foundation, helping your business stay resilient and thrive.
Redwood Collections doesn’t just recover debts - we help position your business for long-term success. Let us help you take the lead, allowing your business to Grow Stronger.
