Zodeq offers an exemplary bad debt protection service which can shield your company from the negative effects of bad debt.
Is bad debt a significant issue for businesses?
Anyone with experience of running a business knows that no company is immune from bad debt and that it can be the downfall of any business.
A recent survey by Company Check revealed that 2/3 of businesses write off bad debts. While 68% had to write off these debts only a third where insured to protect them against this circumstance. This lead to 2.8 million companies finding themselves in financial difficulty due to bad debt.
Causes of bad debt
There are several causes of bad debt. Sometimes it can be caused by a poorly run company but often it is the outcome of an economic situation beyond your control. Many companies faced the threat of bad debt and its consequences following the financial crash. Some financial industry experts have also cited a cultural phenomenon among British business that exacerbates the effects of bad debt. These include a lack of willingness among business to charge interest or complain about late payments. This seems to be especially true for smaller businesses when dealing with larger companies.
Businesses will often ignore late payments when dealing with loyal customers but any customer no matter how loyal can lead you into bad debt with late payments. Economic turmoil can change the situation for your clients. Just because someone was loyal once does not mean they won’t be late with payments in the future.
This is why bad debt protection is so essential for businesses.
Business owners often worry that complaining about late payment could harm future work with their clients and this attitude often leads to clients taking advantage and leading your business toward bad debt.
The impact of bad debt on businesses
Bad debt can easily ruin your financial books, your reputation and make it hard to secure loans/funding.
With such an unstable financial climate in the world and businesses and investors spooked by Brexit, many UK businesses could potentially face bad debt.
UK businesses suffering from bad debt will likely fail to secure business funding. This means they cannot use that cash flow to expand or invest in new ventures, technology, training or software. At the very least this can cause businesses to stagnate and at worse face bankruptcy.
Failure to grow at crucial periods will have a negative effect on your profits so bad debt is a serious matter for any sized business.
Avoid bad debt with bad debt protection services
Remember longer standing debt is harder to collect. If an unpaid invoice is a year old or older it will be very hard for credit control agencies to chase those payments for your business.