Past Due? Bad Debt Collection To The Rescue
When a Business entity collects or tries to collect past due money owed usually in the form of a credit invoice, or seeks the return of its overdue goods, the process is referred to as bad debt collection.
Bad debt for a company includes any money or goods they cannot collect from a credit customer or client. Usually, when a business entity extends credit, it does so in the form of business to business credit. The client or Business that purchases on credit usually receives an invoice which lays out the set date the bill must be paid, and includes the principal sum, any discount offered for paying early, and the interest rate if paid late.
Bad debt collection is not limited to past due invoices and business credit cards. When a business secures a Court judgement against a client, or receives an NSF (Non-Sufficient Funds) cheque for the purchase of goods and services, they are also deemed to be bad debts.
A business entity with only a few bad debts may choose to do their own in-house bad debt recovery or collections. Gathering client information, sending a serious of collection letters each stronger than the last, often motivates slow payers to finally pay up. When a client just won't pay on a bad debt, a Business may choose to register the debt against the debtor's business credit rating. Other options include assigning bad debts to a Collection Agency or choosing to write a debt off.
Choosing to write a debt off, whether it is a partial debt or the original amount is no easy decision for a business. Often, they will have spent a great deal of time and effort trying to collect on a bad debt before reporting it on their income tax return. All truly unrecoverable bad debts must be listed on a Businesses tax return the year they become unrecoverable, and are deducted from gross income.
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