Rules 3 and 4 for Minimising Bad Debts

Rule 3.

Extending credit to another company involves risk. Of course, in most case, the risk is part of the cost of doing business and it is acceptable… so long as it is managed properly.

Even if you were not able to apply any of the other rules to your business, we urge you to apply this one. Why? Because un-tended receivables can get out of control in the blink of an eye. And out of control is the first step towards being out of business. Here are some danger signals you can watch for:

• Slow payment or a changes in payment habits
• Broken promise of payment
• Unreturned messages
• Post dated cheques
• Refinancing or changing banks
• Unauthorised return of merchandise
• Selling at unusually low prices
• Radical changes in buying patterns
• Too rapid growth

These are just a few of the things you should keep your eye on all the time. If you spot more than one of these signals coming from a company which owes you money. it’s probably time to take action

Rule 4.

Don’t show them any weakness

It’s called “sticking to your guns”. When you set terms, be determined to communicate them and stick to them, no matter what. Remember that a deal is a deal. You have fulfilled your obligations, now it’s their turn.

You do it by stating your terms and intentions with clarity and firmness. If you are vague and easy-going about your terms. it’s more likely that people you deal with will be vague and easy-going about paying you.

It’s important to develop a set of reasonable terms and conditions and it’s important to make them part of your sales contract.

A world of advise: If you don’t actually tell them your terms. you cannot assume they understand or accept your terms. You cannot assume that the other person is a dead-beat just because the bill wasn’t paid on time. The truth is that many disputes and late payment situations arise through simple misunderstandings.

Remember to explain your terms ad conditions to your own employees. It’s a common mistake to assume that your own people are well informed about how you conduct business.


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