Head of Finance Solutions
Bad debt is money owed that you can no longer reasonably collect. Bad debt management means preventing it with credit limits and checks, measuring it so you know your risk, and recovering what's possible before writing anything off.
An invoice becomes bad debt when collection is no longer worth the effort or the customer can't pay. For accounting, it's a write-off; for operations, it's the price of selling on credit without control.
The cheapest bad debt is the one that never happens. Set credit limits per customer, check a new customer's history before offering large credit, and review limits as balances grow.
Track the ratio of 90+ day receivables to total receivables. When the ratio climbs, your credit policy is leaking. A formal measure turns 'collections are bad' into a number you can fix.
Recovery is a ladder: automated reminders, a personal call, a payment plan, and finally a formal demand. Writing off early leaves money on the table; chasing forever wastes time. Most SMEs write off at 90-120 days after exhausting the ladder.
Money owed to your business that can no longer reasonably be collected and is written off as a loss.
Set credit limits, vet new customers before extending credit, review aging weekly, and hold deliveries on seriously overdue accounts.
Usually after 90-120 days and after exhausting reminders, calls, and a payment plan.
The share of receivables past 90 days — a rising ratio means your credit policy is leaking.
Yes. Credit limits, aging reports, and automated follow-up in Retten Work catch slippage before it becomes a write-off.
