A doubtful debt is a debt for which payment is uncertain. Once you were happy when this customer came to you. Now you are stuck with it: an invoice remains outstanding. The customer doesn't pay; even after several reminders. The last thing you want to do is accept that you have lost your money. As long as the company is not bankrupt, there is a chance that you can still collect (part of) your money. But it won't make you happy. Doubtful debts are a stick in the wheels of your business.
Doubtful debts: how to deal with them?
Show that you are strict with your invoices and recognize signs when customers are in dire straits. Want certainty of payment? Then consider a trade credit insurance.
What is a doubtful debt?
Doubtful debts: every business has to deal with them!
It is perhaps the most important threat your business faces. Money tied up in unpaid invoices comes at the expense of your working capital. This is the money you need to run your business. The last thing you want is for this to go bad. That's why it's critical for a healthy business to pay adequate attention to preventing and monitoring bad debtors. That starts with tight accounts receivable management.
The whole process of quoting, invoicing, dunning and collection requires a strict, well-defined approach from which you don't deviate. Read more about this in our free white paper "Prevent bankruptcy through non-payment". Everything is aimed at ensuring that your customers see that you are serious about the entire payment process. There's no question about that. This increases the likelihood that your customers will move along and take your invoices on time when payments are made.
How do you deal with doubtful debts?
- Do you deliver on account? Check the creditworthiness of your prospect or customer in advance.
- Has an invoice's payment deadline passed? Give the customer a call and ask what the situation is.
- Then send a reminder letter and refer to the phone call.
- If nothing happens you send a formal notice and later a second one. Then you hand the invoice over to a collection agency. Hopefully that will be enough to still see (part of) your money. Meanwhile, the non-paying customer is on your list of bad debtors.
- At some point-when you have done everything-you have to take your losses. Then you make a provision (accounting-wise) to write off your bad debts.
Prevent doubtful debts with a trade credit insurance!
Would you rather limit your losses due to doubtful debts? Then you can take out a trade credit insurance. With our trade credit insurance we provide payment security. Then you no longer have any doubts about whether you should take on that big order. And you won't lie awake wondering whether a large invoice will be paid.
Financial Information
We analyze the financial health of your customers and prospects every day. This helps you to responsibly decide which customers to do business with, even abroad.
Collection service
Is a customer not paying? Then our collection team will work for you to collect your money. You benefit from our collection network in more than 50 countries.
Compensation
Do we also fail to collect your unpaid invoices or does your customer go bankrupt? Then you will still get your money through our trade credit insurance.
