Invoice finance
How Bad Debt Can Affect Your Business
Bad debt is not just the value of an unpaid invoice. It is the missed opportunities, the thinner margin and the borrowing needed to cover the gap, and there are ways to reduce it.
Tom Young
Co-Founder & Director
• 3 min read
The hidden cost of bad debt
Bad debt doesn't just mean losing the value of an unpaid invoice. It can also mean missed opportunities, reduced profitability and increased borrowing costs. A business may need to use an overdraft or additional finance simply to cover the shortfall created by unpaid invoices.
For example, if a business has £50,000 of outstanding invoices and £10,000 becomes unrecoverable, that £10,000 comes directly off the company's profit unless it can be recovered elsewhere.
How can businesses reduce the risk?
Strong credit control is essential. Businesses should carry out appropriate credit checks, agree clear payment terms and chase overdue invoices promptly.
For businesses that regularly offer credit to customers, credit insurance can also provide protection against certain customer insolvencies and non payments.
Invoice finance can also help businesses access cash tied up in unpaid invoices with the ability to add one bad debt protectionwhich removes the underlying risk.
For an independent, no-obligation review of your options, call 0330 0438 011.
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