The data is clear: poor credit management is costing GCC businesses millions — and formal credit policies are the fix.
Cash flow is the lifeblood of every business. Yet across the GCC, a surprising number of companies — from established corporates to ambitious SMEs — are extending trade credit to customers without a formal credit policy in place. No defined credit limits. No structured approval process. No consistent payment terms. Just trust, relationships, and optimism.
The numbers tell a different story.
The GCC Late Payment Problem Is Bigger Than Most Realise
According to the Atradius Payment Practices Barometer, the UAE’s B2B payment landscape has been under persistent strain:
- In 2023, bad debts affected 11% of all B2B invoiced sales in the UAE — and there was a 75% surge in businesses waiting more than 90 days to collect. Average DSO exceeded 100 days.
- In 2024, late payments still affected 51% of all B2B credit sales in the UAE.
- By 2025, overdue payments were impacting around 58% of B2B invoices — with delays typically extending more than a full month beyond agreed terms.
The most common cause? Administrative inefficiencies — the kind that a documented credit policy directly eliminates.
The SME Blind Spot
SMEs are the backbone of the GCC economy, contributing approximately 50% of regional GDP and employing two-thirds of the workforce (Erad/Jefferies, 2025). Yet they are the most exposed to B2B credit risk — and the least protected.
A UAE Central Bank survey found that while 75% of SMEs identified themselves as financially constrained, only 17% had approached a bank for credit — and only half of those succeeded. This means most SMEs have no external safety net when customers don’t pay on time.
The GCC-wide SME financing gap is estimated at $250 billion (Kearney, 2024). That’s not a number to read past — it represents real businesses, unable to grow or even survive, because cash is locked in overdue receivables.
What Happens When Companies Don’t Have a Credit Policy
The math is unforgiving. A business operating at 10% net margins needs to generate $100,000 in new revenue just to recover from a single $10,000 bad debt write-off — because that lost invoice represents not just revenue, but the labour, goods, and overhead that went into delivering it.
Businesses managing accounts receivable manually write off around 4% of collections as bad debt every year.
- Companies without structured collections processes see payments arrive 12–18 days later on average than those with automated follow-up.
- A company with 60-day DSO on Net 30 terms is running a $1M+ working capital gap for every $6M in annual revenue.
What Happens When Companies Do Have a Credit Policy
The evidence here is equally compelling. A UAE SME Council report found that businesses using structured trade credit improved liquidity by an average of 35%. Retailers in Saudi Arabia employing disciplined trade credit reported a 25% improvement in inventory turnover ratios.
A Deloitte Middle East survey found that GCC SMEs maintaining good payment records on trade credit secured supplier discounts averaging 5–10%, directly improving their cash position. And according to the Saudi Central Bank, SMEs using trade credit instead of short-term loans saved an average of 15% annually on financing costs.
The Credit Research Foundation is equally direct: businesses with formal credit management programs have materially lower bad debt rates — and the companies that excel share three characteristics:
- A written credit policy that is consistently enforced
- Proactive monitoring of customer credit health — not just reactive chasing after missed payments
- Data-driven decisions — not gut feelings or relationship assumptions
The GCC Context Makes This Even More Urgent
The GCC market has unique dynamics that amplify credit risk:
- Rapid growth across Saudi Arabia, UAE, and the wider region means more businesses extending credit to more counterparties than ever before — often without updated credit assessments.
- Limited credit information coverage — particularly in Saudi Arabia — means lenders and suppliers often lack the data to make informed decisions, increasing default risk.
- Relationship-driven business culture can make it feel uncomfortable to enforce credit terms — but without doing so, the financial consequences fall entirely on the seller.
- The shift toward Vision 2030 mega-projects and economic diversification is creating enormous B2B trade volumes. Without credit discipline, the receivables risk scales with the opportunity.
The Action Companies Should Take Now
A formal B2B credit policy doesn’t have to be complex. At a minimum, it should define:
- Who qualifies for trade credit — and what checks are required before extending it
- Credit limits — by customer tier, transaction size, and risk profile
- Payment terms — standardised defaults, with clear exceptions requiring approval
- Escalation steps — what happens at 30, 60, and 90 days overdue
- Review triggers — when customer credit profiles are reassessed
Companies that implement even a basic version of this framework consistently report faster collections, lower bad debt, and more predictable cash flow.
In a region where more than half of B2B invoices are overdue, and where the SME financing cushion is thin, a credit policy isn’t a back-office formality. It’s one of the most impactful tools a finance leader can deploy.
Sources: Atradius Payment Practices Barometer UAE (2023, 2024, 2025); Kearney GCC Retail Banking Radar (2024); Deloitte Middle East; UAE SME Council; Saudi Central Bank (SAMA); Credit Research Foundation; Erad/Jefferies (2025).
