Controlling Credit
Controlling Credit Checklist
5. Recheck existing customers and clients
Recheck the financial standing of all customers and clients on a regular basis and also at times when a sudden substantial increase in purchases is observed. Satisfy yourself that the increase is due to successful selling rather than to a competitor ceasing to supply - perhaps because of problems in securing payment.
6. Recognise the effect of bad debts
Recognise that bad debts reduce bottom line profits and destroy all the effort made in reaching the much larger value of sales required to generate those profits.
Bear in mind also the existence of any bad debt means that time and effort has been expended in trying to collect the money before it is written off and that the cost of these efforts are probably 'hidden' and never identified. However, if you have no doubtful (as opposed to bad) debts, recognise that you may have been missing out on profitable business by being over-cautious.
Future Practice Owner.
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