How can you clean up bad debt?

In high-growth companies where business is go-go-go, it’s hard to justify the extra overhead, or even just the time to stop and think about what you need.

We’ve been there.

Pioneering business ideas, fast-paced growth, client lists and team growth, means that the legal stuff often gets tossed around like a hot potato among those who might not be so legally trained. They may be the owner or on the sales team, using Google as their next best legal buddy. There isn’t a legal department or an HR department or anyone else, for that matter, and the team just rolls up their sleeves to get things done “well enough” (including the law stuff).

One area that often gets thrown into the legal mix is debt collection. Someone owes your business money, no one wants to ask for it or spend time on it, time drags on, and then it’s too late to do anything. However, it’s one of the worst (and biggest) things that impacts your business’ bottom line because it’s a direct driver of cash flow.

Here are the top 3 ways that cash flow hits your bottom line hardest:

  1. A business can be super profitable, but without sufficient cash flow, it could go bankrupt! What? Even with profits? Yes, because it doesn’t have the cash coming in to meet its ongoing obligations.
  2. If your business has a lot of bad debt and is essentially carrying debt in order to meet the ongoing obligations, the rising debt costs could swamp you and your business could go under.
  3. If the business is carrying bad debt, then there is generally an overall state of stress on the business and its employees, which inevitably leads to a negative outcome.

As soon as you think that your bad debt is going to lead to bigger (or longer) problems, we suggest you take steps to get it cleaned up. Your gut feeling is usually spot on and bad debt only gets harder to collect as time drags on. So get the bad debt off your books now!

Contact us to get started!

ELIZABETH MAH
Lawyer-Founder,
Paperclip Law
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