Hi, my name is Adam Stewart, Debt Collection Expert and owner of ADC Legal Litigation Lawyers.
I bet lot of credit managers or business owners get that sinking feeling when they get notice that a company or debtor refuses paying what is owed or becomes insolvent and is unable to pay.
The options left to you when your debtor goes insolvent are few, but not non-existent. This is of course a very difficult situation, and it can be a situation of great danger for the cash flow of your business or company.
Bad debt affects all parts of a business. When a business allows bad debt to happen for too great a span of time, a business may find itself with too many debtors who are not paying. This is where you have to impose the use of good credit control.
Lack of cash flow will eventually make it impossible to run your business on a daily basis. The added stress and potential closing of the business are very real in this situation, and can be hard to deal with. The lifeblood of any business is its cash flow. When there is no cash flow, the result is no business.
Much of a business’s cash flow is in the hands of those who owe the money. Ultimately, it is up to them whether you are paid or not, even though there is much you can do to ensure payment from them before the debt turns bad. These are some of the fundamental fears of a business owner. The future of a business is literally up to someone else in this situation.
There is more stress in slowly removing the life of your business over time because of bad debt. Whether be it financial stress for the business or personal stress you feel, this situation ultimately costs you and those running your business quality of life, which of course hurts the business overall. This form of stress is insidious for any business, eroding the core confidence and happiness that should be two of the key underlying factors in any successful company. Stress caused by bad debt can ultimately take your time and efforts away from what you should be doing, which is concentrating on good credit control and preventative strategies to avoid bad debt in the future.
Worst-case scenario is when your bad debts cause lack of cash flow and you then face insolvency. This is the true final cost of bad debt. Failing to plan for every eventuality, businesses sometimes face the point of having to close down due to insolvency. No one wishes for the day to come when he or she will have to close down and turn back on one’s dreams, relinquishing all the hard work that got them there in the first place. This worst-case scenario results when debtors could not pay their bad debts. Unfortunately, many businesses must face this reality when they do not plan properly for the worst possible outcome.
Indeed, the worst nightmare for anyone who runs a business is bad debt.
There is a simple way to avoid it by working with a debt collection professional. Our partner, Debt Recoveries Australia, can help you with credit control, betters terms, tighter accounts receivable processes and an outsourced solution for your debt collection and litigation matters.