Managing Bad Debt
What is bad debt?
Bad debt refers to an amount of money that is owed to a business or individual but is unlikely to be collected. This situation typically arises when the debtor is unable or unwilling to pay the debt, despite reasonable efforts to collect it. Bad debt can occur for various reasons, including financial difficulties faced by the debtor, disputes over the debt, or the debtor's complete insolvency.
How can I maintain bad debt?
Maintaining detailed records of your collection efforts, including communication logs, invoices, and any responses from the debtor. Good documentation supports any actions you decide to take, from further collection efforts to potential tax considerations.
Once all reasonable collection efforts have been exhausted, and you have gained approval from your regional partner, submit a ticket to National support for City Lifestyle to write off the outstanding balance of the account, cancel the remainder of the account contract, and assign ownership of the debt to you. This allows you to decide on any further steps, with full discretion over any amount recovered. Below are options to consider in managing this assigned debt. For specific advice, consult with appropriate professionals.
- Direct Contact: You may choose to reach out to the debtor to negotiate a potential resolution, either through a full payment or a structured payment plan.
- Professional Collection Agency: Hiring a collection agency is an option, typically involving a fee or commission for recovered amounts.
- Small Claims Court: For smaller debts, filing in small claims court may be a straightforward and low-cost option.
- Legal Consultation: For larger debts, a legal professional can advise on the viability of other legal actions based on your situation.
- Professional Tax Guidance: Consult with a tax advisor to understand how uncollected debt might be reflected in your financial records and any relevant tax considerations.