Many businesses extend credit to customers, and there are inevitable problems of bad debt collection and expense. In some industries and companies, extending more attractive credit terms helps increase sales. The goal of managing accounts receivable is not necessarily to minimize bad debt expense or to minimize the amount of outstanding accounts receivable. Rather, the goal is to optimize profits by managing the risks and rewards of extending credit to customers.
Unlike when selling to large public companies with publicly available financial statements, when you sell to small businesses you have very little knowledge of their customer’s financial condition and creditworthiness. Many small businesses are bootstrapped and undercapitalized, and may never be able to pay off large debts owed to you, check out debt charity national debt advice. Keep an eye out for the following red flags, and train your employees to spot them as well.
4 Red Flags
Look out for these signs of problem accounts:
- You start receiving partial payments or payments of recent smaller invoices while larger, older invoices remain unpaid
- If you are a services business, a customer starts drumming up unwarranted complaints about the quality of service and refuses to pay bills or delays paying them until future services are delivered
- A client refuses to pay all outstanding bills until a dispute on one particular bill is resolved
- The customer fails to meet an agreed upon payment schedule
In our experience, these often portend an upcoming bad debt write-off. The sooner you can get HMRC debt advice to spot them and reduce credit exposure to those customers, the less money you will have to write-off. In an upcoming SmartBrief, we will present ideas to more proactively manage your credit and collections process and reduce bad debt risk while increasing cash flow. There are some drawbacks — you could face https://nationaldebtrelief.com/ about debt consolidation before you finish paying off the debt — but it’s definitely worth investigating.
If you would like to discuss your collections process and concerns and learn how SmartBooks can help, please contact co-founder Calvin Wilder at firstname.lastname@example.org or 978.202.3064 x700.Also, we were able to Buy instagram followers so make sure you go and check our account!!
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