I am going to under-deliver on results because of bad debts. Help!

Dear Aunty B,

One of our key managers has left and when we went through the accounts we found a lot of bad debts going back as far as four years. We now have to write off those debts which means I am going to under-deliver on my results. I am furious as I thought the manager was doing a great job because we thought we had very few bad debts, but now we’ve found out it was because he just sat on them.What do I do to make sure this never happens again? Do I have to be on top of every bad debt myself?

In a lather,
Vic
 
Dear In a lather,

You tell the new manager who takes over the role that the one thing you don’t tolerate is a lack of transparency. You require the manager to do a debtors report that includes a section on debts at different stages. It should then be easy for you to check debts that are more than three months old. Tell the manager that a key KPI is to have no bad debts. How do you do this? Here is your checklist, courtesy of Dun & Bradstreet. 

• Check the history of customers before entering into a business relationship.
• Be confident customers can pay – on time.
• Establish clear credit terms from the start.
• Have regular communication with customers.
• Take action against delinquent customers.
• Establish a good receivables management process to ensure defaults are dealt with as soon as possible. 

Get aggressive about bad debts and let staff know it is a whole-company policy to do business with reputable parties who pay – and on time!

A big part of your business is getting that cash in the door as quickly after the business transaction as possible. So yes, you have to pay attention to setting up the right culture, the right systems and processes, getting the right people in place to deliver on that and the right reporting, so you, at any second of any day know, can find out your position with a stroke of the keyboard.

Once that is in place, you won’t feel the need to be on top of every bad debt yourself.  

Be smart,
Your Aunty B

To read more Aunty B advice, click here.

Email your questions, problems and issues to auntyb@smartcompany.com.au right now!