Every business comes with a number of risks. One of the biggest risks you face in business is that of bad debts. Sooner or later your business will encounter clients who are not ready to pay for the products deliver or services rendered.
But what is Bad Debt? Any debt that isn’t paid on time or not paid at all is referred as bad debt. Not getting paid has immediate implication on the cash flow of the company and affects the financial health and wellbeing of your business.
However, it is virtually impossible to get rid of bad debt. So we have compiled a list of things that might help with reduction in losses from bad debts.
Research Your Customer
Prevention is better than cure and it is true for businesses as well. If you are extending credit to your customers, it is better to do a background check. Be upfront and ask your customers about their past history and credit reports.
If you are dealing with another business, get their Business Information Report. The BIR provides you a company’s profile of profitability, financial stability, payment history. It is an industry standard for analysis and evaluation of any business and taking credit decisions.
Credit Protection
Another solution for avoiding bad debts is taking credit protection. It is basically credit insurance and you pay monthly charges to the credit protectors. This insurance acts as your safety net, saving you from a risk of bad debts in care your customers fail to pay.
Credit Recovery
If all else fails you have one option which is Debt Collection. Involve professional advisers or 3rd party debt collection agency if you don’t feel comfortable with the idea.
The 3rd Party Debt Collection is ideal for businesses that have already failed in their debt collection endeavors or don’t have time to get involved in the legal hassles of collecting credit. These teams make use their extensive expertise and strategies to recover payment from the customers.
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