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How inflation can impact Debt Collection
High inflation can have a negative effect on many aspects of your business, but one impact that is not talked about often enough is the disruption it can cause to debt collection.
Rising costs inevitably mean customers face more financial pressure, and that in turn can mean an increased chance of their paying late or even defaulting on their debt.
High inflation can have several consequences across many sectors, though it is particularly difficult for companies operating in the manufacturing sector. Inflation rises will hurt most companies’ bottom line and the current inflationary pressures in the UK and the global economy are combined with rising fuel prices that add further costs to business.
While some of these pressures can be offset by increasing prices, there is a limit to how much of the burden companies can pass on to customers in a highly competitive environment.
Stay on top of debt issue
The threat of inflation means that it is essential to stay on top of debt problems. Customers who are under pressure due to rising costs and draining cash flow may opt to delay payments, and if you aren’t on top of the issue, this short-term late or even non-payment can become a pattern. It is well known that the longer a debt recovery issue continues, the harder it is to resolve.
By having effective processes for late payment issues, including early contact with customers who are close to defaulting or slipping into later and later payment you have a better chance of being able to deal with issues at an early stage, and you can establish yourself as a priority creditor. So a well-designed and operated debt management plan is more essential than ever.
The importance of Prompt action: Debt Recovery
Rising inflation also can trigger a separate problem. The longer a debt remains outstanding, the less that the debt could be worth to you. Inflation eats into the value of the outstanding amount, which has an impact on your company’s overall financial status. Most companies will increase their prices to reflect rising costs, but the debt won’t reflect that increase, which means you have effectively offered your goods or services at a discount, as well as being unable to benefit from the interest you might have accrued on that late payment had it been made earlier.
At a time of rising inflation and spiralling costs, it is more important than ever to keep a tight rein on your debt issues. One way to tackle the issue is to seek the help of a professional debt collection agency. Whether you are facing a domestic or international debt collection problem, we can give you expert advice and help you to recover your debt effectively and efficiently, while our professional, modern approach will ensure that your vital business relationships will be protected.
If you are interested in finding out more about how a modern debt recovery company works, or you are struggling with late payment issues affecting your company, get in touch with our experienced debt collection team. CLI is a member of the CSA.
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