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Setting up a doubtful debt policy? Be sure to include these four elements...

by , 09 September 2013
Collecting debt isn't easy. But if you can put the right policies in place early on, you'll have a very strong case for doubtful debt allowances. And that means you'll be able to write off bad debts and claim the tax benefit of doing so. To do this, make sure you have a doubtful debt policy that contains the following four elements...

According to the Practical Tax Loose Leaf Service, doubtful debt is where debt has passed a settlement date and efforts to collect have failed.

The good news is you can claim a doubtful debt allowance if you've got a policy in place to manage it.

In fact, if you can show SARS that you apply this policy across the board, you're more likely to qualify for the allowance when your customers fail to pay on time.

Just make sure your company's doubtful debt policy contains the following…

Here's a checklist of the four elements your doubtful debt policy must contain

#1: Your company credit policy must indicate terms of payments;

#2: Your policy must contain actions you take to collect outstanding amounts;

#3: Ensure you include actions you'll take where either the debt is not recoverable or you need to pursue legal action to aid the collection; and

#4: Include a clause which states that you'll suspend any business with the defaulting debtor, except on a 'cash on delivery' basis.

With these four elements in your doubtful debt policy, you'll be sure to manage your debt efficiently.

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