Strong credit management and credit risk is a must for all UK businesses in 2026

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The UK business landscape in 2025 has sent a clear warning signal to directors and business owners across every sector. With total company insolvencies reaching 27,675, more than 1,650 administrations and over 21,000 liquidations, financial distress is no longer isolated to a handful of struggling industries. It is a systemic risk that demands stronger credit discipline and sharper financial oversight.

Construction, retail and hospitality remain the most visibly affected sectors, but the lessons from these failures apply universally. No business is immune to the consequences of poor credit control, weak cash flow management or delayed payments.

Turnover and Profit Do Not Equal Stability

Many failed businesses reported healthy turnover figures and, in some cases, accounting profits. However, insolvency is rarely caused by a lack of sales alone. It is most often triggered by insufficient cash and liquidity at the moment it is needed.

Cash flow is the lifeblood of every organisation. Without readily available cash, businesses cannot pay wages, meet tax obligations, or settle supplier invoices. Liquidity pressures quickly escalate; confidence erodes and recovery options narrow.

Strong credit management ensures that revenue converts into cash. Without it, profit remains theoretical while financial risk becomes very real.

The Role of Credit Risk Assessment

One of the most common contributors to business failure is extending credit without properly assessing risk. In uncertain economic conditions, relying on historic payment behaviour or personal relationships is no longer enough.

Effective credit risk assessments allow businesses to:

• Identify customers with deteriorating financial health
• Set appropriate credit limits and payment terms
• Reduce exposure to bad debt and late payment
• Act early when warning signs emerge

Crucially, credit risk assessment is not sector specific. Whether operating in construction, manufacturing, professional services or retail, every business that trades on credit carries exposure. Understanding who you are trading with, and how much risk you are carrying, is fundamental to long term sustainability.

Late Payment and the Domino Effect

Late payment remains one of the biggest threats to UK businesses. When customers delay payment, the impact is rarely contained to one balance sheet. It flows directly down the supply chain.

Businesses under cash pressure often respond by delaying payments to their own suppliers. This creates a domino effect, pushing otherwise viable businesses into distress. Many insolvencies are not the result of poor trading, but of being unpaid by customers who themselves failed to manage cash properly.

Paying suppliers on time is not just good practice, it is a critical part of economic stability. Strong supplier relationships, supported by reliable payment behaviour, reduce risk across the supply chain and protect long term trading relationships.

Cash and Liquidity as Strategic Priorities

Cash should be treated as a strategic asset, not an operational afterthought. Businesses that actively monitor cash flow forecasts, debtor days and working capital requirements are better placed to withstand economic shocks.

Liquidity provides options. It allows businesses to:

• Absorb late payments without immediate crisis
• Invest confidently in growth opportunities
• Negotiate from a position of strength
• Avoid emergency borrowing or insolvency actions

Those options disappear quickly when cash is mismanaged.

A Universal Responsibility

The 2025 insolvency figures reinforce a simple truth. Good credit management is not a finance department issue or a sector specific concern. It is a core business responsibility.

Robust credit policies, regular credit risk reviews, disciplined collections, and a strong payment culture protect not only individual businesses, but the wider economy.

Final Thought

In an environment where insolvencies remain elevated and creditor action is increasing, businesses that fail to prioritise credit control and cash flow place themselves at unnecessary risk.

Strong credit management keeps cash moving, suppliers paid and businesses trading with confidence.

If you want to strengthen your credit processes, reduce risk and improve cash flow resilience, now is the time to act. Engaging proactively with credit management specialists can make the difference between stability and distress.

So give our team a call or email us at info@pecunia2016.co.uk

Tracey Westell FCICM