Bad debts

     Free daily tips, information and advice for people in small business
     from someone who has been there, done that in several small operations.

     You accept a customer's check, and it bounces. You accept a credit card, and later, the bank backs funds out of your account. You send your invoice to your customer, and it is returned.

     If you accept anything but cash, you are extending credit. Every business that extends credit has some of it go bad. Extending credit means taking a risk.
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     Benefit from these ideas if you are in: *Retailing   *Computer Services   *Graphic Arts   *Florist   
     *Construction   *Manufacturing   *Landscaping   *Dentistry   *Consulting   *Crafts

     Checks: You need as much information as the law allows on the person writing the check. At the very least this includes name, address, telephone, and other identification (driver's license, etc.). If the check is returned, you'll have some information to help you locate the person. 
     
     Company checks are another matter. Check out new companies and call the bank listed on the check. In some cases, you might want the bank to freeze funds in the account to cover the amount of the check--call the bank and take it from there. Be alert to changes in signatures.

     Credit cards: I always asked for another form of identification before accepting a credit card. Typically, it's a driver's license or other form of identification that has a photo of the person offering the credit card. 

     With today's automated systems, you know almost immediately if the card is good. But does it belong to the person presenting it? You don't need the problems associated with stolen credit cards.

     Invoices: If your practice is to submit invoices for goods/services sold, work out policy details ahead of time. Your policies should be firm and clear. And don't make exceptions.

     Decide your terms. If you expect to be paid in 30 days, state "net 30" on your invoice. If you give a discount for quick payment, state it.

     I've used "2 % net 10" to good advantage when dealing with larger companies--they put your invoice on top of the stack in their accounts payable department. The practice of adding penalties for late payment is not as strong an incentive.

     If bills are not paid on time, call the customer/client immediately. And continue to call. After all, it's your money they are now using. You never want collections to drift to 90 or 120 or more days delinquent. You must manage payments to avoid bad debts. 

     Questions? I retired with I turned 75. You can email me at AlWarr16@gmail.com with your questions. Pu BLOG in the subject line. Quick answers from my 40+ years of experience founding and running small businesses. Your privacy is always respected.