Debt Management: A Key Weapon For UK SME Businesses In The Current Cost-of-Living Crisis

To say that the UK SME business sector is facing pressure at the current moment in time is quite possibly one of the biggest under-statements ever made. Read on to learn about debt management.

Debt Management

They are facing ongoing shadows caused by Brexit and the Covid pandemic, pressures continuously facing supply chains across multiple sectors and a fluctuating global economy. Add to this the ongoing cost-of-living crisis affecting the amount of disposable income in the pockets of many people, and you begin to understand the enormous pressure that SMEs are under.

However, SMEs account for 99.9% of the UK’s business population – a clear indication of the important role they continue to play in the national economy. Statistics show that SMEs account for three-fifths of the employment and around half of turnover in the UK private sector. Furthermore, as of 2022, total employment in SMEs was 16.4 million (61% of the total), whilst turnover was estimated at £2.1 trillion (51%).

Therefore, if the SME sector faces significant danger, there will be a problem on an unfathomable scale. We simply cannot risk any further substantial losses to the ones we have already seen recently. UK government statistics reveal that in 2021, there were 5.6 million SME businesses – a considerable fall of 6.5%, or 389,600 businesses, compared to 2020.

One of the answers to ensuring businesses remain in the best health they can is to ensure all aspects of the balance sheet are performing to their optimum level, with liquidity levels as high as possible.

This means there is no room for debtors. Late payments cripple cashflow and can incur additional costs – something that cannot be tolerated in the current economic climate.

The Impact of SME Debt

The impact caused to SMEs by late payment can be crippling. A recent survey reveals that small business owners are being exposed to stress, financial worries, insomnia, depression and have even seen personal relationships affected by the problems late payment is causing them. Indeed, 41% of SME owners said that late payment had caused them issues outside of work.

The survey also reveals that almost half (48%) of SME business owners are worried that they might not be trading this time next year. Also, some 66% of SME owners have had to supplement their cash flow with the use of personal funds. This includes many that have had to re-mortgage their homes and cash in pension policies.

It is therefore perhaps not surprising that investment in debt management systems is increasingly becoming a top priority for many businesses. Figures show that the global credit management software market size is expected to be worth around USD 3.7 Bn by 2032 – up from USD 2.2 Bn in 2022.

This puts it at a growth rate of a CAGR of 5.3% from 2023 to 2032.

Why Are Debt Management Systems Becoming Increasingly Important For UK SMEs?

Debt management systems are designed to help businesses manage their credit and collections processes. They automate tasks such as credit checks, collections, and dispute management so that businesses can maintain healthy cash flows and reduce the risk of bad debts. We have seen the impact that bad debt can have for UK SMEs – therefore, for any businesses that are reliant on the prompt payment of all invoices, services such as these are particularly valuable.

Although historically debt management systems have not been prioritised by UK SMEs, we are likely to see this change – for a variety of reasons.

Chief among these is that businesses, already under financial pressure, are increasingly having to streamline, prioritise and concentrate on their core function more than ever before in a bid to remain competitive. The stress and the “embarrassment” of chasing clients, many of whom will often become close associates, for unpaid debts is not something that many people enjoy.

The impact of technology is also making debt management systems a lot easier to navigate. As an example, the production of letters, statements and reminders can now be fully automated. From the cash allocation side, invoices can automatically be matched against client details and workflow errors or exceptions.

Furthermore, full reporting and a KPI suite can now be updated in real time to assess payment status.

Another reason driving the increased take-up of debt management systems is the rising adoption of cloud-based credit management software solutions which offer increased freedom and accessibility.

Debt Management Outsourcing

Outsourcing providers specialising in providing debt management services can offer a fully managed process without SMEs needing to invest in debt management systems directly. Crucially, the upfront cost of such technology will be met by the outsourcing provider rather than the business itself.

The impact of such technology cannot be overstated.

Client bank transfer payment data and customers transfer remittances, debit notices and direct debit mandates can all be coordinated by the debt management platform which can then connect to the retailer’s system via Virtual Private Network (VPN) to load the banking data. The retailer’s order system, CRM or banking system can then be accessed, allowing emails and voice calls to be actioned to manage accounts in line with specific policies and procedures.

Advances such as these will ultimately save companies a lot of money. No longer will they be reliant on labour-intensive models which are leaving them exposed to risk.

Outsourcing specialists also incorporate other essential functions, including working with existing software systems that are being used by companies, and the ability to scale-up, or scale-down, dependent on the needs of the business. This is because the outsourcer can bring staff in, or deploy them elsewhere, as the need arises. Likewise, the business does not have to worry about holiday or sickness cover, as this too is covered by the outsourcer.


The UK SME business sector is vital to the overall health of the UK. Millions are dependent upon it, and it is one of the major contributors to the overall economy.

It is therefore vital that it is kept as financially secure as possible – and credit management functionality is an area that is increasingly rising in prominence as a way of tackling the bad debt that can cause untold problems.

Indeed, the UK SME sector is increasingly sending a message that is loud and clear. The “accounts owed” folder is only a temporary destination. If clients or customers overstay their welcome, they will be asked to move on in a timely, efficient manner.

By Craig Naylor-Smith, CEO, Parseq