Allowing clients to trade on credit is a common way to facilitate more business. However it can also lead to short term and long term financial burdens when repayment terms are not adhered to and bad debts are allowed to accrue. See why too much outstanding debt is a game changer and not for the better.
Hefty receivable debts place a considerable drag on businesses resources. When bad debts accrue, not only are you losing profits on unrecoverable debts, you are most likely:
expending staff resources chasing the debts,
purchasing finance to maintain cash flow, and
paying fees for defaults and late payments on …
Businesses spend a significant amount of time and money trying to attract clients, so it can seem counter productive or even ludicrous to suggest that you should intentionally rid yourself of a client.
However, there can come a time in a commercial relationship where it is simply no longer commercial or financially worthwhile. Persisting to trade with clients who are not paying their bills, can cost you money, decrease staff morale and impair your ability to provide good service to other clients.
On the other hand, culling a few of your difficult debtors and replacing them with good clients can improve cashflow, …
A business without a good debt recovery system is like a bucket with big holes in it. No matter how much effort you expend filling it up, your bucket is only ever partly filled. Efficient debt recovery procedures ‘plug the holes’ where earned income is slipping away and ensure that the business receives what it has rightfully earned.
Many businesses tend to focus much of their time and effort into the front end of their sales campaign whilst neglecting to bring up the rear. Many also lack the time, resources and expertise to quickly and efficiently recover unpaid debts.
The reality is, …
Businesses that offer goods or services on credit, face the risk that some clients may ultimately not pay up. This could result in significant financial losses and even financial ruin. Like all risks however it can be mitigated with appropriate policies and procedures so that negative impacts are minimised.
You can’t expect to get credit from a bank without undergoing rigorous financial and credit checks.
Likewise, a business can reduce the financial risk of extending credit by requiring all clients to apply for credit and by refusing to trade on credit with those clients who have doubtful means to pay their bills.
For a multitude of reasons, businesses often have weak accounts receivables policies. The result is that despite generating impressive sales figures, the money just isn’t making it through the door and goods and services are effectively being given out for free.
Make no mistake, overdue accounts cost your business money and they can significantly impair cash flow, placing you at risk of being unable to pay your own debts as and when they fall due. Not having sufficient capital on hand can also prevent you from being able to invest in growth opportunities, increase shareholder payouts, upgrade your equipment or expand …
If your business allows clients to purchase products or services now and pay for them later, you are essentially extending them credit, assuming they have the means to pay for the transaction. While this can help to facilitate business, it does leave you wide open to the risk of serious financial loss. For this reason, it is vital that you establish bulletproof terms of sale prior to extending credit to any client.
The terms and conditions in your credit application, together with those appearing on invoices, order forms and your website may all form part of the contractual agreement between you …
When improperly handled, overdue receivable debts can severely impact a business’s ability to stay afloat. Overdue accounts not only cost money to collect, but they mean that cash flow is not available to the business, meaning it itself is at risk of accruing debts that it cannot pay. This is especially so when overdue accounts become long-term or ‘bad’ debts.
When debt ‘collection’ becomes debt ‘recovery’
Effective and consistent debt collection procedures can go a long way to preventing ‘old’ debt. However, even businesses with the most efficient debt collection procedures will end up having to deal …
Working towards owning your own commercial property has many positives, you can:
Pay yourself to ‘rent’ your own space
Customise the building for your needs
Combine functionalities to streamline your process
Expand at your own pace
Sublet areas of your building, and more
However, despite its innocuous title, approaching a commercial mortgage is entirely different from that of a residential mortgage.
So what are the main differences?
Mainly, borrowers need a much larger deposit to secure a commercial property. While residential properties …
Through experience, business owners and operators become naturally attuned to the peaks and flows of the economy. However, when the livelihood of your workers and your family are at stake, it is too great a risk to place complete trust in gut instinct.
So how do business owners and operators plan for and recognise times of growth and recession?
Despite its dense and often complex background, successful businesses will follow the macro “financial cycle” of their environment to inform business decisions and avoid glaring pitfalls.
What is a financial cycle?
Also referred to as business cycles, financial cycles map out the rises and falls …
Every company had debtors, people who owe them money, the last thing we want is for a client to go under or be deemed unable to pay. If a client is going under we should be able to identify if they are and be able to prepare a plan to tackle this. What are the warning signs of a client going under?
Warning Signs of A Business Going Under
Business’s that cut their dividends are experiencing tough times. They may just be experiencing a rough patch but if they are looking to boost revenue …