Did you know that from a survey done in UK, 47% of SMEs have no provision in place for bad debts or unpaid invoices? 34% will rely on legal action should they find themselves in such a situation, 27% would use their bank overdraft facility and 15% even plan to cover their shortfall with their own savings!
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:
ACRA Bizfile- to purchase company’s & people’s profile
You’ll need to know whether the company is Pte Ltd because if so, they may be liable only up to a certain amount of the debt and debt collectors may not be able to get much from them after they declare bankrupt
Yeah, finally! I just checked my account online and it’s good news! Although it’s not the full amount (it’s the full 2009 amount), it is already about 75% of the debt! The debt collector will be chasing them again now that this first cheque has just cleared.
I feel so happy about this. It’s no longer about the money but more of showing my debtor that I will not be pushed around anymore.
I was right about the hiring the debt collector. These people must have thought that we were pushovers and when we hired debt collectors, they simply handed the money over real quick. Money that was owed 4 months was simply paid up over 1 weekend!
This bad debt was money deemed as lost initially but the situation has turned around! It’s victory in my opinion.
I rather pay a the debt collector who are so much more deserving of the money than these unscrupulous businesses who take advantages of small businesses.
I’ve started a category on ‘Debt Collection’ on this site to share more about my experiences and the steps you can take to increase your odds of collecting back your bad debts. You can also view the category on the right side of this page. I hope this will be of help to businesses in the same situation.
It may mean that the customer has lost credit with another supplier and is ordering more from you to fill the gap
Payment become increasingly slow
The customer may have cash flow problem
Groundless complaints about shipped orders or excuses about invoice misplacements etc.
The customer may be stalling time to delay payment
Makes partial payment instead of the agreed full payment
You receive numerous excuses on non-payment
For e.g. change of accountant, management, busy festive period. misplaced invoices etc.
Makes payment for smaller amount even though earlier outstanding invoices are not cleared according to date
The customer gives excuses about mixed up invoices such that they can pay off the smaller amounts instead
So, if you see any of these bad debt warning signs, do exercise extra caution in extending additional credit to your customers.
And I’d like to hear from others too who have experienced bad debts. Do share your comments so that we can all learn and avoid getting ourselves into bad debts situations.
It has taken me a few days to find the perfect wordpress template to use for this new site and I am very satisfied with this current one that is easy for a beginner like me to tweak and customize.
Do go to this site for free wordpress themes download. They have several nice ones which can be easily customizable.
This red and brown coloured wordpress template rightly convey my passion in running my own business. I like the warm feel it exudes and I also wanted to put in my own picture in the header.
Why so? Becuase the books represents my interest in reading and the apple, my appetite for knowledge.
As any entrepreneurs will know, this is a path of contant learnings and challenges.
Now that the basic setup is done, let my sharing begins.
I had an eventful day 2 days ago. As you may already know, I have been chasing a bad debt for some time already and we finally took action 2 days ago. Yeah!
When I first realised that the debtor has been pulling our noses along all these while, I decided to go all out to claim back my rightful payment. But there were many routes to take and being really green at bad debt collection, we needed to consult our other working partners and weigh our options carefully.
We didn’t want to rush into the situation, neither did we want to lose time as time wasn’t on our side. Our debtor was closing down very soon. I knew deep in my heart that this time I want to go with my gut instincts. I will weigh all odds carefully, do my homework and let my gut decide. And my gut instincts told me that these are not nice people who are sincere in repayment and we should not play fair with them anymore.
The decision making process was one filled with a fury of emotions and arguments.In the midst of this mini crisis, I came to realize that many would dish out advices out of good will to influence you to see things their way. Everyone thought they knew better. In times like this, being the owner of your own business, you must do this:
Learn how to weigh the odds and take calculated risks
It is imperative that an entrepreneur is willing to do the above
If something is bound to happen for sure, anyone will know what to do next. In uncertain times, you just have to weigh the odds and go with the course of action that will most likely lead to your desired outcome.
Have the courage to take responsibility and trust in your own judegment
When you have made up your mind after careful consideration, there’s no need to fear your decision is not the best one. It is simply the best one at that moment if you have done your homework well and explored all options.
Do your own homework
Do not rely on others in difficult times because you yourself will know your own business better than anyone else. You will know what is the best thing to do.
But do still keep your mind open before coming to a decision. The key thing is to be selective in seeking opinions and practise critical thinking. More often then not, most people will dish out textbook advices which sound right in theory but not of much value in a practical situations.
Now that our decision has been made and action has been taken, I’ll keep you readers updated of the outcome. I’ll also share more about bad debt collection information that I have gathered in the process in my upcoming posts.
I feel happy and liberated. Previously, I was reactive and had to respond to what the debtor do or tell us. Now, I feel that we have gain control of the situation and it is a truly liberating feeling. Have a restful weekend everyone! =)
Recently, I have been plagued by the feeling of defeat. It feels like I have stumbled and stumbled and just as we’re about to take off, we’re stumbling again.
When things don’t go your way in business and when others have deliberately set out to take advantage of you, do you feel like it’s a game that you haven’t master?
I must remind myself that defeat starts in the mind. It’s my attitude and reaction to this situation and the best course of action to take that will determine the odds of winning.
And the game has not ended; I’ll remember to bite back twice as hard this time and GET EVEN!
I wished I knew about this book before I started my own business. It made me rethink my whole business model and pointed accurately what we have felt was lacking in our current business.
Some key learnings from the book that I found useful:
Difference between small business owner / self employed vs big business owner
I do agree that if you have to work in your business for it to continue operations, it is hard to grow it and basically, you’re still working for someone; your customers. The key thing is to work onyour business.
Plan your business model properly before you start a new business so that it can have the potential to grow to become a successful one.
Get some real life experience before starting a new business
So that you will have a better understanding of all aspects of running a business.
Hard work cover up poor design
A poorly concieved business will hold up as long as the entrepreneur works hard in it. The moment the entrepreneur stop working hard in it or stop out of sheer exhaustion, the business will fail.
3 kinds of money
We are all born with a gift an to discover it and give your gift in business is a choice to be great.
Where do you earn your money from?
Corporative: partnership and teamwork
Competitive: most peple work for this kind of money
Spiritual: money earned when a job is done in response to a higher calliing
B I Triangle
what make up a sound business model:
I strongly recommend you read this book if you have the intention to become an entrepreneur. There’ll be more details about what I touched on above and I’m sure you’ll find something useful in it too.
Making money is of course one of the reasons why businesses exist. However, I don’t think it is the main reason that makes a company successful.
We’ve heard many times that it is actually passion that drives a great business. And money is a measure of how well you play your game in business; it is a measure of success.
So, should an entrepreneur be hungry to get rich? I think it is an absolutely must! If not, you might as well call the business a hobby instead if it doesn’t generate sufficient cash.
Recently, my partner and I have decided to come up with a new business idea to generate 1 more stream of income. We brainstormed about the new business model such that it’ll be a more sustainable and profitable one. We also thought through the up and coming trends that’ll make big bucks for us. After narrowing down our choices, we did more intensive research and fine tuned this new idea.
2 days ago, we met up to discuss about how to go about executing this new business idea when we found ourselves in a limbo. Somehow, something was not right and we could not proceed further in every angle that we turned.
That was when I suggested that we take a step back and put this new idea aside for a while. We had to think about what moves us instead and visualize what we’d enjoy doing if everything can fall into place nicely. We had to find our calling and mission.
I realised at this point that we have moved away from our passion and centered our new business ideas on making money instead. Maybe this is why it didn’t work out as we expected it to. And when we refocus our thoughts on a totally new idea that the both of us were more passionate about, everything seems to flow more freely. This 2nd new idea seems to have a higher chance at succeeding.
So, be hungry! But do realise that there’s a difference from being hungry to get rich and being hungry to get rich from your passion.
You need to combine your passion and the desire to get rich to succeed. ‘Coz when you do reach there someday, it’ll mean that you have succeeded in playing your game well. That’s our goal too.
