Did you know that a 5000 bad debt can actually cost your company 50,000 or even 200,000?, Well it's true!!.
If your profit margin is 10%, you will have to find 50,000 worth of new business to pay for that 5000 bad debt. If your profit margin is only 2.5% you will need to generate 200,000 worth of new business just to be in the position you were in before you suffered from a 5,000 bad debt. That's without considering what you spent in terms of time and effort chasing the debt and what about the other more obvious costs like solicitors or for the time the salesman had to go round to try and get a cheque, all the phone calls and letters your staff had to do etc. All in all you could have spent another 5000 only to watch as the debtor went into liquidation and you get nothing as a result. If you had only been tighter on credit control or recognised the warning signs sooner!.
UK Debt Collection say that things are getting very tough out there and say that more businesses are going to the wall faster now than at any time since the early nineties. UK Debt Collection recommends that you review your customer credit facilities on a regular basis. Regular credit reviews are essential and don't fall into the old trap of being tough on new customers but relaxing after a couple of years for older "more reliable ones" because they had been good payers. Treat every customer as though they are on probation and you may just save yourself 200,000, or even stop your own company going to the wall because it is a fact that bad debts force more companies to fail than any other reason.