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Reducing bad debt for small businesses

Many businesses offer their customers credit as a way of encouraging loyalty and remaining competitive within their industry. Credit allows customers to use a business' products or services without committing to an immediate payment. Indeed, it may be many months after receiving a product or service that the invoice is fully paid.

Offering credit has obvious advantages for businesses and consumers, but it is not without its risks. A string of late or non-paying customers results in what's known as 'bad debt'; and being labelled as having bad debt can be extremely detrimental for companies large and small.

For SMBs in particular, the effects can be even worse. Bad debt immediately affects cash flow, impinges on credit ratings and can even prevent a business from securing its own credit in the future. Needless to say, bad debt could have disastrous consequences, so what can be done to prevent it?

Credit recovery
If you have exhausted all other options in trying to collect debt, then you should seek help from a credit recovery firm. These teams can assist you during any stage of the invoicing and will tailor their approach to your business and customers' needs.

Credit protection
One way to avoid being plagued by bad debt is to take out credit protection.

Credit protection works a lot like insurance; you pay a firm a monthly sum and the insurers protect your cash flow by guaranteeing that you receive the full invoice value on any unpaid credit.

Credit protection acts as a safety net for SMBs, ensuring that all credit is paid regardless. Your cash flow will be protected from any unforeseen circumstances, which significantly limits the risk of bad debt and a poor credit rating.

Credit protection will give you that added peace of mind when offering credit to customers. Knowing that you will always receive payment may even encourage you to extend your credit terms in order to become even more competitive within your industry.

If you are looking for tailored finance to grow and develop your business, then get in touch. We would love to help.

'WESLEYAN’ is a trading name of the Wesleyan Group of companies.

Wesleyan Assurance Society and Wesleyan Bank Ltd are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Wesleyan Financial Services Ltd, Wesleyan Unit Trust Managers Ltd, Practice Plan Ltd and DPAS Ltd are authorised and regulated by the Financial Conduct Authority.  Advice about investments, insurance and mortgages is provided by Wesleyan Financial Services Ltd.

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