Debt is fact of life. At some point, you will either owe a business or other creditor money, or you will be owed past money for a product or service. But the issue of debt is a delicate one, and debtors and creditors alike must be mindful of the best approach to achieve personal debt recovery and debt collection solutions, respectively.
In general, it is important to recognize good debt vs bad debt. To keep good debt from turning into bad debt, maintaining positive cash flow is crucial. Sometimes small businesses have to deal with preventing bad debt on two fronts.
On the one hand, if the company does not have the sustained means to pay its bills, net profits can quickly turn into devastating losses. Consciously supporting consistent business income while closely monitoring expenses is key for sustainability of the business. The seriousness of this dynamic is underscored by the reality that more than half of new businesses shut down in five years or less of operation, according to the US Small Business Administration.
In addition to that however, small businesses have to know how to effectively deal with customers and business partners who have accumulated bad debt and cannot make sufficient payments. This often unpredictable factor must also be closely watched.
If you own a small business and there are those that owe you money, there are some general tips that prove useful. First of all, you will want to determine whether the debtor in question has good debt vs bad debt. You will want to make sure that your debtors know that you are cautiously monitoring the situation without becoming overly aggressive. In part, this means that you should not call regarding a debt owed more than once daily, and when you do call, any judgment, condemnation, or otherwise hostile attitude should be check at the door, so to speak. In the end, this calm vigilance will help you to get the money you are owed more quickly.