Although the stressful period of retrieving my bad debt is over, I still have many customers that cannot pay up in full or delay the payment by 1 month or so.

One in particular was unable to pay us the large amount that accumulated over 2009 Christmas sales.

After understanding their situation and the business owner’s sincerity, we worked out a payment deal in which we would collect a fixed amount of money weekly so that our cash flow can improve and it will not be so taxing for our customers to pay us a one big lump sum of money.

5 months have since gone by and I’m happy to say that 70% of the debt is cleared.

We have been supplying goods to this customer the whole time throughout and they try their best to pay us, albeit having 1 or 2 weeks delay sometimes.

This arrangement has helped both of us to continue working together without much unpleasantness and more importantly, to serve our customers and grow together.

I guess different situations call for different debt collecting tactics.

Unfortunately, even with good working relationship with suppliers and customers,  every businesses will still experience bad debts. For the rare few that don’t, they should count themselves very lucky. And for the rest of us, you can either seek solace that you can claim deductible expense when you file for tax or you can TAKE ACTION against your debtors.

Bad debts usually mean that small businesses would be hit with cash flow problems and face immediate pressure on the business. And cash flow problems is one of the main reasons for failure of small businesses.

Also, chasing bad debts can be a very mentally exhausting process. It is frustrating and time consuming. When faced with our first case of bad debt collection, our normal work process was put on a slow down mode as we tried to contact our debtor every few days to follow up. It was totally time wasting! Moreover, it can be demoralizing and draining, affecting your performance at work.

There’s a few option for bad debt collection. Before you proceed with the best course of action, you got to assess the situation and weigh your options carefully as every case is different.

Do keep in mind to start recovering your bad debts within 6 years or you chance of recovering the bad debts will be close to zero.

I’ll touch on the few options in my upcoming posts:

Legal Action through Small Claims Tribunal

Debt Collector/Debt Collection Agencies

Handling it on your own