How To Protect Your Business From Growing Bad Debt?
The bad debt can badly affect businesses, even the full-fledged business. Sometimes, it can cease the operations of the company and ultimately stop the business. The outstanding debt is directly linked with bad cash flow. Bad cash flow is one of the biggest problems faced by many business owners around the whole world. All business owners should implement some faceguard policies to ensure their safe future. Some of the top tips to protect your business are described below:
Updated Systems And Processes
It is very important to keep the system and processes at the right place so that you do not have to deal with a missed payment. You should stop supplying products and services to those clients who have not paid the due amount.
Before that, it is very important to maintain the record of every important detail such as which client has paid the due amount, which dates, how much amount is left to be paid, etc. You should maintain a separate record of aged receivables. The accounts receivable professionals should know how to write off AR in Quickbooks so that the aged receivables can be easily determined.
Check The Credit History
Before onboarding a new client, you should check the credit history of that person. You should make sure that the past record of that person is clean. Also, you should speak to the suppliers and colleagues to know the history of a new client of your business. It will help you to get the deep picture and let you know the truth.
Ask For Upfront Payments
Asking for the upfront payments for the customers is a good idea to prevent your business from bad debts and maintain good cash flow in the business. You can ask your clients to pay at least 25% of the total payment as upfront payment.
By asking for the upfront payment, you can also determine which clients are serious and which are not. Moreover, by asking for the upfront payment, you can significantly reduce the burden on your business. By requesting the client to pay milestone payments, you can ask to ensure good cash flow in the business.
Create The Payment Terms And Rules
You should set the payment rules and regulations for your clients and always stick to them. It is a good idea to set the payment terms and prepare the doc of the same. You should prepare an agreement and ask your client to sign it if they are agreeing with these policies. You should not do business with those who refuse to sign the agreement.
These rules will clearly convey the policies of your company and avoid any kind of misunderstanding. This kind of agreement will not just ensure regular cash flow in the business, but also help in strengthening up a bond with the clients. You should mention all these terms while sending the invoices to the clients so that they do not forget the same.
Lucrative Incentives For Early Payers
You can encourage the clients to make early payments by offering lucrative incentives for making timely payments. These incentives could be anything such as a discount on the total payable amount. Most people will start paying early to get the discount. This tip will help in ensuring good cash flow in the business.
Stay In Contacts With Clients
You should maintain a healthy relationship with the clients. The business relationship with the client is just like other relationships in our lives. You have to work on it to keep it good always. Therefore, it is recommended that you should stay in touch with them through phone calls, emails, messages, and other ways. Sometimes, unfortunately, clients just forget to pay the due amount.
By sending the gentle reminder message to the clients, it is possible to recover most of the due amount. By personally talking and contacting the clients, it is possible to determine the main reason behind delayed payment by the customers.
Prevention Is Better Than Collection
It is very important that the accounting system and processes are accurate. Also, these should be properly represented so that everything is clear with just one glance. There are so many software providers that offer the same and solve your trouble. By investing in the right accounting software, you can speed up the collection process and reduce the debt burden on your business.
You should properly maintain the record of every client. The new technology automatic accounting system will help you to quickly send invoices and reminder messages to your clients. The AR professionals should know how to write off bad debt in QuickBooks– online accounting software.
Quickly Send Invoices
It is imperative to send the invoices at the right time so that your customers can quickly pay the amount. If you will delay sending the invoices, then customers will take more time for making the payment. You should promptly send the invoices and clearly mention the last date for payment as well.