10 Amazing Tips to avoid bad debts

In modern world most of the businesses will face such situations from their customers who – for one reason or another – will refuse or deny paying back or who always pay their pending overdue bills so long after they are due. So we thought we should share some excellent debt avoiding tips which will be reducing the risks of having bad debts.

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  1. Assess customer’s creditworthiness and then set proper credit limits. We may ask the new customers for their trade references or we could give one more option to them by paying for an online credit check. Also one more thing you can do is set a lower credit limit for your new customers until and unless you are sure enough that customers will pay back on given time.
  2. Set up crystal clear agreement terms(You may use your professional legal advisers if need be). Make sure your clients or customers are aware of these terms and you should get your clients to agree on these terms of accordingly. Publicize all the terms and conditions on your main website and attach a copy of it along with your goods and invoices. Also add a clause which states that you will own goods until they have been paid for, and asking clients and customers to point out your attention to any delivery problems in advance and promptly. Remind your clients that you have a right to charge interest on late payments (even if you don’t really have intentions or plan to enforce this right).
  3. Always check to whom and where you have to send your billing unpaid invoices; you also have to send these invoices to your buyers for approval before it can be paid or send it directly to the client’s accounts department.
  4. Always send invoices promptly and then start following up for the payments as soon as they are due. You should be very active when you’re chasing the long overdue debts because it’s a very important part of minimizing late payments. As soon as you start doing this and sooner it should start getting you paid.
  5. First thing you need to find out is that your customer has a regular payment system(eg a monthly cheque run). You should consider your system to be adjusted to fit in with this: for example, chasing and following up as soon as you think your payment has been due or it’s missed out or by giving them a call in advance to make sure that a cheque will be issued accordingly.
  6. Call your clients when the invoice becomes overdue or pending (eg the individual who placed the order) and tell them to help, as routine letters are usually ignored by the clients. A very diplomatic approach will definitely work especially when we need to have a continuing relationship with our client.
  7. You really have to Resolve all the disputes and do it quickly (eg if the customer claims the goods were faulty). You will not to be paid until this is done.
  8. Rethink all the terms and conditions on which you have business with clients which regularly pay late: for example, increasing the prices you already charge them or by cancelling their credit facility accordingly.
  9. Implement a strategy in case your defaulter continues to hold or delay your payment. You may need to waive off small debts that are not really cost effective to follow or chase. You can also put your client’s credit facility on hold so it will reduce or prevent any further credit sales until the account is cleared. Another alternative way is to negotiate the part-payments or to use an arbitration or mediation service like debt collection firms and agencies. This can often help to resolve disputes without the expense of going to court.
  10. Ask for your professional advisers and legal advisers or professional debt collection firms if all your attempts to recover the debt are unsuccessful. Your debt collector can follow up and chase the bad debt for you or they will suggest a professional debt collection agency. A solicitor’s demand letter or legal notice may be enough to prompt payment without any further action. But small claims (for up to AED 5,000) can be dealt with relatively quickly and inexpensively using the small claims track options.

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