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A sensible business practice in providing credit is to undertake appropriate measures to prevent the incidence of bad debts. These measures do not need to be complicated or overwhelming.

The following simple preventative measures will be a good start:

• Conduct a credit check on new clients - this may include each client completing an application for credit. A credit check may include business and personal details, credit references/guarantors or a commercial credit check.

• Ensure that your credit policy and conditions are clearly explained to your clients.

• Ensure all agreements, including the conditions of credit, are made in writing and signed.

  

• If practical, collect a deposit or pre-payment before making a supply. Alternatively you may collect progress payments to reduce the risk of bad debts.

 Maintain your debtors' account and make regular credit reports to highlight any due or overdue debts.

• Implement a structured practice for following up overdue debts. In the first instance, this may involve making a phone call, visiting your clients or sending a polite reminder letter.

• Continuously evaluate the credit rating of your clients.

• Remember: you are not obliged to provide credit to risky clients.

If you still incur bad debts after having implemented credit management strategies and you wish to recover these debts, you may do so through the three following methods:  Consultation, Letter of Demand or Legal Proceedings. It is advisable that you select the appropriate method(s) for recovering your bad debts.