This week, reposting an oldie but goodie from our archives.

Why does every small business not have an active plan to recover bad debt? Good question! They certainly do need to focus on their accounts receivables just as they focus on new business sales and customer service. Nothing will hurt cash flow more than slow-paying or non-paying customers. Some business owners are hesitant to tackle their accounts receivables because of some old myths about cash, credit and bad debt collection. 

Here is the truth about some common myths about credit and collections.

1. Accounts Receivables are NOT cash – Your receivables are a promise to pay. You cannot grow your business with them, pay your employees with them or use them to buy new equipment. If you let your receivables sit on your books too long, the promise to pay becomes less likely to be realized, and may disappear forever. The money is not earned until it is in your bank account.

2. Small businesses cannot get a tax benefit from writing off bad debt. You are throwing money away if you try to do this. 

3. Debt collection is not too expensive. 

4. Waiting too long to pursue bad debt is not a good strategy, and can hurt your business. 

5. Payment plans should never be based on a handshake. They should always be documented. 

6. Going to court and getting a judgment is not always the best strategy. 

7. Credit bureau reporting is not the best way to collect money. There are risks associated with credit reporting that you should know.

8. Bankruptcy does not always mean you cannot collect at least some of your money. Here is some good information on what to do if a customer declares bankruptcy. 

9. Bounced checks can be recovered. 

10. Collection agencies do not  usually buy debt. In fact, many small business local collection agencies do not buy the debt, but rather work in an agency agreement with the original creditor. Most of the large debt portfolio buyers purchase debt from banks or other lending companies. 

Do you want to write a collection letter that gets results? We can help. Download our free guide today.