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How to avoid having bad debt
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[QUOTE="Caramelle, post: 207519, member: 150"] [JUSTIFY]In some industries and types of business, granting credits is standard practice. You may have to grant credit terms in order to gain or keep your customers. Such credits can turn to bad debts or uncollectible accounts under unfortunate conditions such as willful default and economic downturn. As a lender or creditor, you can avoid bad debts by applying the 5 C's of credit, namely character, collateral, capacity, capital, and condition. Credit policies should be put in place and this will usually include placing a cap on the amount that an individual or company can borrow. These limits will reset only upon payment of outstanding accounts. Giving consideration to the borrowers' cash flow and matching the frequency of collection to the cash flow are likely to result in the efficient collection of debts. Alongside tight credit policies, businesses should be able to implement robust and consistent collection activities. This will include giving timely reminders prior to due dates and making systematic follow-ups on past due accounts. A systematic collection approach follows prescribed actions at certain points in the delay, often leading, as a final resort, to the referral of the long outstanding account to a debt attorney or legal counsel. The business will also do well by supporting a cordial and professional relationship between their collectors and the debtors' employees or business owners. [/JUSTIFY] [/QUOTE]
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