How do you avoid losing money due to Bad Debtors?


 As a Business Owner, you may have to be very cautious in protecting your money more than earning money.

The following are some of the steps that can help you to protect Bad Debts in your business.

1. Supply your goods against cash as far as possible

2. Send Credit Application Form to get signature from signing authority

3. Request Trade License Copy of a company

4. Request an Aadhar Card or Passport copy or any other Identity card copy of the owner

5. Set a Credit Limit and do not go beyond the credit limit. Do not give Credit to one customer more than the 10–15% of your turnover.

6. Start off with a low credit limit and short invoicing terms. As the client shows a regular pattern of paying invoices on time you can increase and extend your credit terms

7. Request Letter of Credit

8. Request postdated cheques

9. Request bank Guarantees

10. Be wary of customers who undertake aggressive sales and price-cutting strategies as they may not be able to pay their bills if they are offering their products too cheap

11. Always stay up to date with industry and economic trends. If the economy is slowing down, you may want to be a little stricter on your credit terms

12. Credit Insurance: One of the best ways to protect your company from overdue accounts and bad debts is to take out credit insurance. Credit insurance covers you for any outstanding money owed to you by trade customers. If your customers do not pay, your policy will reimburse you in full.

13. Have consequences conveyed to your customer in case they don’t pay on time.

i) Like additional interests

ii) No further supply until clearing payments

iii) No Support services until clearing payments

iv) Legal action against them in case of non-payment

v) Prepare warning sequences for collecting payments

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