Cost of living crisis - Are you managing debt effectively?

Written by Ian Barker Small headshot image of Ian Barker, Managing Partner at BFY Group.
23 Dec 2022

External cost of living pressures are continuing to have a significant impact upon customers and their ability to pay, leaving suppliers with mounting debt books that are increasingly difficult to manage.

Both B2C and B2B suppliers are being impacted, with the challenges appearing in different ways.

In this blog post we talk about some of the common themes, and how we're supporting clients to manage and transform their capabilities during the cost of living crisis.


Back in August 2022, we wrote a short white paper outlining some of the steps suppliers should take to engage with customers during this challenging time. This paper is still available for free download by clicking the image below, and we will be following up with further insights over the coming weeks.

Further down in this blog, you can see our forecast for the debt landscape in 2023. We have then outlined four questions that suppliers can ask right now to manage their debt more effectively.

  • Is it time for a refresh on multi-channel comms?
  • How can people and processes be improved?
  • Which areas of Direct Debit insight are most valuable?
  • What are the benefits of a debt sale?

What can suppliers expect in 2023?

Last year, we worked with multiple B2C and B2B suppliers to help them support and engage customers, put them through debt rehabilitation journeys, and increase debt resolution.

These have been challenging times, with supplier debtor books growing significantly - and material increases to Bad Debt Charge. 2023 will be even more challenging, with the lagged impact of the Bad Debt Provision hitting P&L's.

We are seeing some encouraging signs - where suppliers are engaging with customers, then customers are responding. But this takes a clear concerted effort, and highly trained staff capable of having difficult conversations to do the right thing by customers.

Is it time for a refresh on multi-channel comms?

You may be doing multi-channel comms right now - if you're not, then this is an urgent change you need to make. If you are, think about the last time you refreshed your contact strategy.

Nudging customers through the right channels, and giving them the ability to communicate back through the right channel will have a material impact on your ability to manage debt.

Case Study: We delivered £15m of immediate benefits, and rehabilitated 35,000 customers - mitigating ~£50m of future risk. Looking across people, processes, comms, and technology we were able to make a material impact quickly for a client who had previously achieved 'best-in-class' levels of performance.

How can people and processes be improved?

It's imperative that you invest in your people - both from a skills perspective, but also a sense of purpose and wellbeing. Collections is a very challenging role, and your people should be well trained to deal with challenging conversations.

Outsourcers have played a huge role in supporting suppliers with collections, and will be even more crucial during 2023. All customer facing colleagues, whether in-house or outsourced, must have the necessary investment in their development and capability to be able to support customers through the cost of living crisis.

In B2B, agents will have a number of training needs in order to achieve high levels of performance. First, is the knowledge of how the debt is built up, covering areas like standing charge, consumption, estimated reads, and deemed contract.

Then they will often have to deal with issues of liability, such as change of tenancy or landlord debts, and issues of solvency, like a sole trader who has ceased trading or a limited company who is 'Proposal to Strike Off'.

Subject Matter Experts and Performance Coaches can be deployed to make an immediate impact - and with the availability of todays technology, it makes immediate improvement in offshore teams all the more achievable.

Case Study: We understood the [B2B] team’s performance, aspirations and objectives, creating an environment of trust and building rapport. We set targets and created new call structures, complete with guides, prompts and self-assessment templates. The team’s focus was shifted to collective performance and team-based problem-solving, with best-practice as a core principle. We almost doubled the collection per agent, delivering a £3.5m uplift in cash.

Which areas of Direct Debit insight are most valuable?

Direct Debits have become a blackbox level dark art, when much more can be done by software vendors to drive real actionable insight for suppliers and customers.

Suppliers must stop looking at the net position generated by the Direct Debit engine, and look to understand four areas:

  1. Customers in credit who are creating excess cash flow
  2. Customers in debt who are materially under paying
  3. Customers who are in exception (e.g. Cancelled Direct Debit, incorrectly set up etc)
  4. Customers who are at risk of 'friction' due to the Direct Debit engine (e.g. volatile consumption)

Case Study: BFY recently helped a client redesign their Direct Debit strategy, improving cash flow, while also reducing the capacity required improve collection rates from customers under paying compared to their consumption.

What are the benefits of a debt sale?

Some customers will be unable to pay their debts within suitable timescales for many suppliers. A debt sale to an experienced debt purchaser will often enable customers to repay their debts over a 10-15 year horizon, and reduce the operational costs to collect - and allow you to engage with other customers through the rehabilitation journey.

Each year we're engaged by new clients asking to support them in building a debt sale capability within their existing strategy.

Case study: Our client was a major European utility, who was looking to under go their first debt sale in the UK. We delivered benefits of over £20m, put in place an internal debt sale capability, and they have been successfully using debt sale as part of their collections strategy for more than 5 years.

Speak to our debt management experts today

We hope this blog has given food for thought on the potential avenues for improving debt management, amongst the challenges of the current cost of living crisis.

If you have a question about any of the guidance covered above, please let us know in the comments section.

To find out more about our services in Customer Debt and Debt Sale, contact Ian Barker or Rachel Littlewood today.

Ian Barker

Ian shapes the BFY vision and inspires our team to bring it to life, while remaining central to complex client engagements in Strategy, Commercial, and Operations.

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Small headshot image of Ian Barker, Managing Partner at BFY Group.