The health of your business lies in the amount of money that it is handling. Of course the highest percentage of the money should be running towards the business and not away. There are so many transactions that your business will be handling and among these is credit. There are customers who want to make payments via credit, which is okay. However, you need to learn how to really get the credit taken care of. Handling debt is not so easy regardless of whether you are the one with the debt or it is your customers who owe your business money.
Debt recovery ranks particularly high among the most difficult activities to engage in. It is one of those processes that can be frustrating on top of being too tedious. This is why there are debt collectors. A majority of businesses will hire debt collecting companies to get their money from those who owe the businesses. This is one method, but if you can go about it on your own, then that is just great. There are ways that you can avoid situations of bad debts that stress your life.
Avoiding bad debts
1. Find out who you are giving credit
Before you give anyone credit, you should make sure that they are creditworthy. There are people and businesses that are just not worth your services on credit. You should do a thorough background search to make sure that you understand the business that you are giving credit to. According to many a debt review available online, companies claim that they did not carry out enough research on their clients before giving them credit.
2. Credit limits
Always set credit limits that are safe for your business. You should not have a credit limit that allows a customer to take huge credit that might paralyze your business operations. For instance, consider that you have given a customer such a huge credit that has downed your stock significantly. There are other customers who want to pay cash for the products. This is more like a loss for your business.
3. Do not release goods
The best way to keep bad debts under control is to hold the release of goods. Do not release the goods until the debt has been cleared. You can give the customer what they have paid for and with each payment release some more. Even if you know where the customer lives, you should avoid releasing products without having the debt cleared.
4. Keep contact with customers
Communication with your customers is really healthy for your business. It is also healthy when it comes to the process of controlling bad debts. Always stay in touch with the customers because this will help you understand exactly what the customers think about your business and even their plans.