Removal of bad debt is one of the highest risks you face in business in terms of the cost. It is virtually impossible to eliminate bad debt, but it is possible to keep the debt under feasible control. There are the top steps through; you can minimize your debt:
Review your customer:
When you are going to extend credit to a potential customer then you should review his history thoroughly. You should have policy to do a background check and you should be upfront and let your current consumer know about credit risk minimization. You will offer them one key of providing references by their current Suppliers. Experience counts, thus quite possibly acquiring specialist help could be the least complicated.
Request a deposit:
If you have achieved a good more time to project on, or need in order to buy materials to create a merchandise request for a good deposit to pay your own minimum costs. It is normal exercise with many companies so you don’t need to be shy about asking. You should give an estimate with a deposit required as a note may be the best way to bring it up.
Create a payment collection procedure:
Try some procedure like this
1st day: Provide the invoice on the accomplishment of job or shipment of finished product.
3rd day: Follow up with the call and confirm that the invoice is received and accepted.
25th day: They have only week left for payment, A gentle reminder email should be sent with the invoice details regarding to the bank.
33th day: If you did not get the payment, then pick up the phone and call them for the debt collection but be polite and firm.
Request a minimum payment on unpaid accounts:
This method of debt collection is usually used by credit card companies, but you can also use it too. You should request to your consumer that they should pay some portion of payment as much as they can afford. This will decrease the risks of bad debt. Your patience and offering good options to clients for payment will increase the chances of good relationship with the customers and also increase the chances of full payment.
Use discount and reward options:
Few businesses offer a discount option to get their payments on time. If you are facing difficulties with the debt recovery process, you can also use the discount option in your next installment of payment. Whether or not you’ve already been stored waiting for payment, there’s been a negative effect from your own money Flow. You are spreading the cost regarding this negative affect coming from discounting of the future equally opposed to being able to know. Don’t forget to adjust the cash Budget in order to incorporate this discount.