Tips to Avoid Bad Debt

If your business offers credit, you must be careful when a new customer opens an account. Below are some tips that can help avoid acquiring bad debt.

Check credit references and credit reports. This can give you a good idea about how well your new customer will be able to pay off their debt. Also, never extend more credit than your company can handle.

Explain all transactions. Make sure your customer understands every detail. Do they know when a payment is due and for how much? Make sure they also understand the ramifications of paying late or not at all.

Routinely send statements and reminders of due dates.

Make sure your company has a plan to deal with accounts that have become overdue. Send past due notices and try to talk to your customer over the phone or in person about the past due payment. Do not harass, threaten or lie in order to get them to pay on time, it will only work against you.

Set a final due date if previous attempts to get your customer to pay his overdue balance. Don’t extend the deadline, and let your customer know that if they do not pay by the final date, the account will be turned over to a collection agency.