There are some precautions a business owner can take to protect themselves and their business from bad debt. So many business owners ask me if they have to change the way they do business to protect themselves. The answer is yes if you don't have and enforce a credit policy.
Things you must do to protect yourself and your business from bad debt are:
ALWAYS get a credit application filled out and signed.
Check ALL references.
Have a credit policy in place before extending credit.
Enforce your credit policy.
You would be surprised how many companies have credit policies, but they just don't use them. Be firm about being paid from the beginning and you will set a precedence. It is much easier to have new customers fill out a credit application when they want something from you. It is harder to have someone who has been a customer for a long time fill out a credit application, they may be offended and even take their business some where else.
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