How Being Prepared for Bad Debts can Improve Cash Flow Decisions

One of the more unpleasant aspects of being a business owner is having to chase clients that do not pay.    It is simeltaneously frustrating, stressful and disheartening, while attempts to collect are an utterly unproductive use of time and can have a significant impact on cash flow, particularly if you are unprepared.

There are ways to mitigate the possibility and impact of bad debts.  Some of these include: 

  • Performing a credit check on potential customers
  • Charging a retainer, which is paid up front
  • Offering discounts for early payments
  • Allowing several payment options including credit cards which allows for immediate payments
  • Following up on delinquent receivables dilligently.

Regardless of your efforts to prevent them, incurring bad debts is often inevitable and ultimately, a cost of doing business.  Consequently, it is important to ensure that you are prepared.

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