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Three ways to tell if your company has run into a bad debt disaster

by , 18 August 2014
Bad debt is a thought that haunts business owners and keeps them up at night. It can destroy a company and force it into liquidation.

But how can you tell if you're heading down that dark and scary road? After all, it's better to spot the patterns before they turn into a full blown financial disaster.

Luckily, today we're revealing three ways you can tell if your company is heading for a bad debt disaster...

 

Look for these three signs to tell if your company has a bad debt problem

 
Sign #1: You have to constantly hound your creditors for payments
If you have to spend weeks, if not months, chasing creditors to pay you then you may have a bad debt problem. You see, if your creditors can and intend on paying you won't have to chase them as much.
 
This could be a sign of creditors who are reluctant to pay you and eventually they won't.
 
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Sign #2: You have a high percentage of creditors who don't pay on time
Look at the number of creditors who don't pay on time compared to the ones who do. If you have more creditors that don't pay, those bad debts will become a serious financial problem.
 
You should always have a much higher number of reliable creditors so those who don't pay don't jeopardise your entire business.
 
Sign #3: You have to take out bank loans to cover the money lost on bad debts
If you have to seek financial aid to cover you loses, you have a bad debt problem. This means it's time to slam on breaks and find a way to deal with bad creditors.
 
If you spot any of these signs, reconsider the way you check your creditors. You may need to do more detailed credit checks to ensure your creditors will actually pay you. Don't give credit to anyone with a poor credit score.
 

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