Can Bad Debts Lead to Insolvency?


Through our time working with businesses who are heading towards insolvency we have realised that the causes of insolvency are similar across a number of different business areas. 

When a company has debts owed to them it can have a big effect on the productivity and success of a business. Simply, when payments are failed to be made a business can suffer cash flow problems and it is a lack of cash flow that has a big impact.

Luckily, there are a number of steps a business can take to reduce the likelihood that bad debts will spiral out of control. Bad debts lead to insolvency and therefore it is important that all outstanding payments are made when required.

At Kingsland Business Recovery we help businesses with their insolvency problems – whether that is avoiding insolvency or helping a business through the insolvency process successfully – and we have a wide range of tips for helping a business to avoid bad debts.

Preventing Bad Debts Leading to Insolvency

As bad debts can lead to insolvency it can be beneficial to take on board some of our top tips for avoiding financial crisis in a business.

  • Set out clear payment terms and ensure the other party agrees to them. This can help to receive payments on time before bad debts occur.
  • Before extending credit terms make sure the customer in question is able to meet them.
  • Promptly issue invoices so the customer is expecting them and is likely to make the payment quickly. Late invoices can be forgotten about.
  • An easy to follow payment schedule can help customers that may struggle with large payments upfront.
  • Chase missed payments as soon as possible.
  • If a customer continues to miss payments consider putting any credit they have with the business on hold.
  • Speak to debtors personally as emails and letters can be discarded.

To avoid bad debts leading to insolvency be sure to stay on top of all incoming payments and missed payments. If you are still faced with a debtor that will not pay legal proceedings may be required.

For some businesses, bad debts lead to insolvency. If you are struggling with insolvency or are worried about the future of your business, contact Kingsland Business Recovery today on 0800 955 3595 or contact us online.

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