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Preventing bad debts
Knowledge is key when it comes to preventing bad debt. It is important to do background checks on your customers, to ensure that they are a reliable and trusted source.
You should also check whether a company is in liquidation or deregistered on ASIC Registers.
Providing simple, easy and clear payment options is also important, as well as invoicing customers in a timely manner.
Additionally, creating sensible limits on the credit, will help to reduce the risk of bad debt.
How does a business recover debt?
When recovering a debt, it is important to take the necessary steps to ensure that the debt can be recovered.
This includes checking the terms of the contract, regularly monitoring when payments are due and received/not received, contacting the customer in writing to request payment, keeping records of all customer correspondence, sending regular payment reminders, and engaging a debt collector if the customer still won’t pay.
If the customer does not pay the debt after all the steps, it is necessary to take legal actions.