Depending on the industry you’re operating in, a single change in payments could affect your bottom line to the point of rendering your business operations unprofitable. More often than not, trying to write off bad debt is not the best route to take. Here are a couple of reasons to help you see why:
- The word gets around quickly
If your business gets a reputation of not chasing debts, how do you think this is going to affect the people who have no intention of paying you? You’re going to attract them like moths to the flame. Surely, this is not the type of customers you want to be dealing with.
In the end, clients with a low sense of responsibility and ethics will be more than happy to take advantage of knowing that nothing will happen if they don’t pay you. Therefore, the best solution to the problem is not attaining such a reputation in the first place. It’s very hard to get rid of it later on!
- Write offs will cost you
Regardless of the fact that you may be willing to go through the technicalities of writing off bad debts, this is not going to drive down the cost of doing so. Sometimes, legal action will be required, and the long sessions in court will not only result in tons of attorney fees, but also eat up a large portion of your time and patience.
Even if you’re sure you can handle it all, it’s probably not going to be free. In most of the cases, it’s better to find a way to recover from the debt and leave writing it off when it’s time to make a last ditch effort. If you’re convinced you want to fight the legal battle, make sure to hire a reputable commercial litigation lawyer who will represent your interests as devotedly as possible.
- You need a steady cash flow
In case you own a large corporation, you can afford to absorb a financial hit every once in a while. But if you’re a small business, such a hit could have devastating consequences for your entrepreneurial future. In other words: most small business owners need the money as soon as it becomes available, lest they risk having their operations come to a halt. Since time is money, this may end up being more costly than you might think.
In other words, having a healthy and steady cash flow is the only way to go. The younger your business is, the more important this basic principle is to follow.
Conclusion
Far too many business owners fall into the trap of relying on having the option of writing off bad debt, but as you can probably tell by now, it’s much more complicated than it looks. This is why you should always strive to exhaust all of your other options before even starting to think about heading in this direction. At the end of the day, you want to operate a business with a clean record and reliable clients.
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