Avoiding Bad Debts


Having bad debtors is damaging to cash flow and can be extremely dangerous for any business.

Techniques to avoid bad debtors include:

  • Obtaining a credit reference on the organisation that you intend to trade with
  • Avoiding doing business with companies whose credit rating is poor
  • Ensuring that the other company knows your payment terms at the outset
  • Invoicing at the earliest opportunity
  • Stating the payment terms clearly on your invoice
  • Sending a reminder as soon as possible, if payment is not received by the due date and having a policy to chase the debt after a fixed number of days following the due date
  • Chasing up the debt by telephone if there is still no response. This will enable you to determine whether there are any queries on the invoice and, if not, to discuss a date for the settlement
  • Writing to confirm the agreed settlement date and send by fax or post
  • Stating clearly that the matter will be referred (after the agreed extended period) to either a debt collection agency, a firm of solicitors, or the county court small claims department