The challenge of bad debt in business is unavoidable as you have rightly said but like you also said we can also avoid this challenge by being accountable in our business as bad debt advisors in a situation whereby we take depth that we cannot pay off and this kind of death comes to b the organisation or business later.
The best way to avoid bad debt in business is to always collect collateral before giving any depth to anybody with these you can be rest assured about any debit.
There are sometimes in which the collateral may not even be enough for you to sell and get back the money you gave out as a loan , in this case what do you think should be done .it is advisable to avoid giving out loan at once,
A neighbor mortgage his small building that is unfinished. When he was not able to repay the loan the bank forfeited the collateral. That was 7 years ago and until now the property is not sold yet because there are no buyers. The unfinished building has lesser value.
This will now be a great loss to the bank that were offering the loan to the man, I don't see the need for us to risk our life in getting a loan to start of anything, I don't see it as a good idea
Most times no matter how you try on how to run your business without borrowing,you just have to source for funds elsewhere to fund some projects you can' afford.But the credit collected must be for a viable project that has a high means of bringing in returns and possibly pay up the debt,else it should'nt be taken at
The truth is, you cannot totally run away from bad debts especially when you run a small scale business. You can't request for collateral when you sell products less than $2 on credit.
You are right that the bank erred in giving that loan to the owner of the unfinished building. Now the building is still there, no improvements which means it is still held by the bank in their list of assets. I wonder what happens next because the loand to the building was a long time ago.
You know what ? I think the bank are not willing to sell out the property now and maybe they're keeping it for it to appreciate in price for a long time, they might sell it out in the next two to three years from now when the price will be a little bit reasonable.
You should not always give credit facilities to customers that are not trusted to pay back the money. Before you sell goods in credit, you must makes sure that the customer is regular, trusted and reliable to pay back the credit facilities on time.
But this should not be the case in terms of banking because they are trying to help the small bodies to establish their own business, do you think they have made the wrong decision by giving out loan to people who are interested to survive ?
No matter how hard you try, at least certain amount of money will go to bad debt. for that reason it is very important to take security property from the borrower. So that even if they can't repay the loan, at least some losses can be avoided.
Yes I'll be able to avoid bad debt in my business when I manage my business finance well and also do general audit every year.
I haven't been in a situation whereby I will have bad get weed at my workplace or in the business that I have been apart you need to manage briefly and my secret is that I always make sure that whatever expenditure that I make happen should be very important for the business.
