Simply put, bad debt is money that is owed but has been uncollectible, so would then be written off as lost. Not good for anybody!
All companies should seek to prevent bad debt but it’s a risk that businesses face when granting credit to clients. The great news however is that this risk may be minimised with good credit management.
Here are some steps you can take today to help avoid bad debt:
1. Credit check new and existing customers
This is the first thing you should do with new customers and is a critical step in a solid credit control process.
A good credit check will give some insight into a businesses payment behaviour, if they have a custom of paying bills late, how much of a risk that business will be to your finances if you give them credit and what a suitable credit limit would be relative to the risk they pose.
Additionally, it’s important to credit check and monitor you existing customers too. Circumstances can often change since you last conducted a credit check on a customer so being alerted to any changes that could be deemed to put your business more at risk will help you act quicker, mitigating this risk.
Good credit managers use data from multiple sources to run a comprehensive credit check.
Check-it offers business credit reports and monitoring by bringing all of this information into a single simple to use dashboard, enabling companies to make better informed business decisions, respond quickly to changes by tracking your client’s credit reports and identify risky payers before you do business together.
2. Regularly check sales ledger
Because credit scores and reports can change month to month, it’s Important to have a good understanding of your sales leger and monitor your existing customer’s credit file to be certain that there’s no cause for concern with outstanding credit and to mitigate risk when reviewing credit terms for a new sale.
Check-it alerts you to any liquidations, administrations, notices and potential fraud relating to any company on your ledger to mitigate credit risk. Know-it seamlessly integrates with your accountancy package to give you a complete view over your credit management processes.
3. Set processes for chasing and collecting payment
Great credit management helps companies understand exactly when bills are due and when payments can be expected. Firms with the very best credit management procedures have at least one individual, sometimes a whole team, responsible for tracking when invoices are sent and when payment is expected to be made.
A process should be set up for sending payment reminders and chasing payments when invoices aren’t paid on time. Businesses which don’t have this process set up consistently struggle to regain what they’re owed since they’re too disorganised.
Chase-it is our payment chasing tool that allows you to schedule payment reminder emails, letters and text messages using fully customisable templates. Through our integrations with all leading accountancy packages Chase-it will know which invoices need chased and which have already been paid.
By completely automating your payment chasing process you’ll have more time to concentrate on growing your company.
Unfortunately, not all invoices will be paid on time. In really bad cases it can feel as though you’re banging your head against a wall trying to collect payment so a helping hand can make all the difference in ensuring that you get paid before the outstanding credit becomes bad debt.
Collect-it gives you an instant quote to collect your overdue, unpaid invoices delivered in partnership with commercial debt recovery experts at Darcey Quigley. Collect-it builds your case using data and your customer’s credit history from Check-it and Chase-it and you’ll see real-time case updates on your Know-it dashboard with instant notification when a payment has been made.
Know-it is a revolutionary platform that enables you to effectively manage all your credit control, mitigate risk and better understand your customers. Simplify your credit management processes with Know-it. Get 30-days free now!