Is Your Cashflow Suffering Because You Are Falling in Love With Old Invoices?

There is something I don't understand.
Why are businesses (people) so willing to provide goods and services on credit yet so reluctant to collect the money? Why do people get so attached to old unpaid invoices that they just don't want to let them go?
We have recently run a campaign for our Debt Recovery service for which we had an overwhelming response. Initially we were shocked surprised and pleased with the response however when we got into the detail, the picture that emerged was less sunny.
It would appear that businesses, or more accurately people within them, hang on to old invoices in the hope that they will be paid eventually, despite what their best instincts are telling them. It seems that people don't want to upset their customers by asking them for payment or just don't want to take action that confirms a mistake was made when extending credit to a particular customer.
This I just can't understand, particularly when the impact is so severe.
First definition of a "customer" from Google:
"A person, company, or other entity which buys goods and services produced by another person, company, or other entity"
And a definition of "buy":
"To obtain ownership in exchange for money or value."
So to be a considered a customer the whole cycle has to be complete, you give your prospective customer something of value and in return they give you something of value, usually money.
Business does rely upon a certain amount of credit however one should extend credit with caution. Giving credit on trust alone is a surprisingly regular occurrence. One of our recent contacts, a company selling CCTV equipment had "...given credit because [the "customer"] could not get it elsewhere. Just take a moment to re-read and ask yourself if the likely outcome was as predictable as we thought.
The impact of this decision;

• 5k of goods not paid for = £5k off the bottom line.
• To cover the loss £25,000 of sales need to be made at 20% margin
• The business turns over £150k so that is equivalent to 2 months revenue.

In this case I think any sane person would say credit should not have been given in the first place. However it seems when it comes to extending credit then asking for the money rational thought is sometimes abandoned. In this instance there were other difficulties; the contract was unclear, so the business didn't actually know with any certainty to whom they had extended credit and just to ensure the waters were well and truly muddied, they left it for 12 months before chasing it.