Skip to main content

Bad debt management


Many small businesses have problems with their financial health. You may need to utilize financial statement analysis to diagnose the problem. The three most common ones are debt management, inventory control and collecting accounts receivable and they all can inhibit your business's cash flow. As we mentioned earlier cash flow is the main reason why businesses fail so it's very important  to have positive cash flow and avoid cash shortages.

If you already have an existing loan that is causing the problem, you may be able to get a consolidation loan or negotiate the loan terms. Debt consolidation is a form of debt refinancing that involves taking out one loan to pay for many others. It can secure a lower interest rate and convenience of repaying only one loan.Usually you will repay the debt in set amount of time.  If that is not an option for you can renegotiate loan terms. Modification can include the interest rate or the length of the loan, rate structure can be modified or the payment can be postponed. 

 Not all types of debt may be suitable for your business. You should take professional financial advice  what is the best solution for you. Our advisers at Emry Capital  will walk you trough the process and help you obtain the funds you need. Line of credit might be the right solution for you because you only pay for what you use and you can use it whenever you want.

Other common problem is about bad debt, in other words failing to collect your accounts receivable. That can really damage cash flow of your business but sometimes customers and clients won't pay you no matter how much statements you send them. You may event take the matters to court and still not be able to collect the money. To sum up, the bad debt is a debt that cannot be recovered, either because the debtor is bankrupt, has financial problems or because it cannot be collected. Bad debt can be written by the creditor at the end of the year. You should include the bad debt total on your business tax return but you can do so only if you use accrual accounting method. 

 To avoid such situations you should get into a habit of checking your customers credit. in that way you can reduce the risk and avoid maybe financially devastating decision. Getting the money is always better than bed debt and we can help you with that. We offer you the opportunity to turn your unpaid invoices into cash with our invoice factoring program. You can decide how many and which invoices to submit. Based on the strength of your customers you will get a credit line and your credit will grow together with your sales. 



Labels

Labels:
Location: West Palm Beach, FL, USA

Comments

Post a Comment

Popular posts from this blog

How to use accounts receivables to finance your business?

Inventory financing is a type of asset-based financing where working capital is provided to a company through accounts receivable, inventory, machinery, equipment as a collateral. Accounts receivable financing or factoring use outstanding accounts receivable as a means of financing. Both methods are usually used as a quick access to a working capital, money you use for daily operations. This can be alternative to a bank loan especially if you own a start-up company. There are other financing companies that can offer you factoring services and really help you manage a positive cash flow. Pledging accounts receivable means that you use your accounts receivable that are not paid yet as a collateral to obtain a loan but you are still responsible for collecting a loan as a business owner. Lender picks accounts receivable they want to accept as a collateral. Accounts receivable that are overdue or ones in which you extended the credit for too long are very likely to be refused by the...
Post a Comment
Read more

Credit report and credit score - what you need to know

Credit score is generated by an algorthm using your credit report. Its main purpose is to help lenders to decide whther to approve loan application and determine the terms of that loan. In other words they are determining risk, how likely is that you will repay your loan. Credit report and credit score is not the same but they are connected. There are three major credit report agencies also known as credit bureaus Equifax, Experian and TransUnion that collect information about you and sell it to other companies. Credit reports show what bureaus knowa bout you. They gather information from many sources. Part of their information they get from lenders. Lenders report loans you took to one or all theree agencies. This also means that your credit report might be different in each agency depending where lender reported it. Some lenders don't do reporting so it is important to work with ones that do if you are trying to build your credit. Other part of information comes from publ...
Post a Comment
Read more

Difference between cash flow and profit

You might think that cash flow and profit are the same terms that can be used interchangeably. They are indeed the key aspects of a business but they represent two different financial parameters. Business can have a positive cash flow but no profit or it can have large profit but negative cash flow. How is this possible? Cash flow is exactly what the name says, the way cash flow trough business,its inflow and outflow. Companies use it to meet current and near-term obligations. If company has a negative cash flow in the worst case scenario it can lead it bankruptcy. Positive cash flow means that business can always pay suppliers, meet payroll, purchase inventory, pay taxes and other expenses. Conserving a cash flow is one of the most important features of a good business. It takes time and planning, sometimes even professional assistance. Profit, also called net income is a difference between gross income and expenses. When you subtract your expenditures from your s...
Post a Comment
Read more