HOW MUCH DOES A BAD DEBT COST?
Did you know
that a £5000 bad debt can actually cost your company £50,000 or even
£200,000?, well it's true.
If your profit
margin is 10%, you will have to find £50,000 worth of new business to pay
for that £5000 bad debt. If your profit margin is only 2.5% you will
need to generate £200,000 worth of new business just to be in the
position you were in before you suffered from a £5,000 bad debt. That's
without considering what you spent in terms of time and effort chasing the debt and what about the
other more obvious costs like solicitors or for the time the salesman
had to go round to try and get a cheque, all the phone calls and
letters your staff had to do etc. All in all you could have spend another £5000 only to
watch as the debtor went into liquidation and you get nothing as a
result. If you had only been tighter on credit control or recognised the
warning signs sooner!.
Collection say that things are getting very tough out
there and say that more businesses are going to the wall faster now
than at any time since the early nineties. UK Debt Collection
recommends that you review your customer credit facilities on a regular
basis. Regular credit reviews are essential and don't
fall into the old trap of being tough on new customers but relaxing
after a couple of years for older "more reliable ones" because they had
been good payers. Treat every customer as though they are on probation
and you may just save yourself £200,000, or even stop your own company
going to the wall because it is a fact that bad debts force more
companies to fail than any other reason.
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