It’s a scary thought isn’t it, but could one bad debt bring your company down?
The frightening thought for many companies is that “yes, it could!”. Have you considered the impact of a significant bad debt on your business? Do you ever lie awake at night, worrying about the possibility of a single bad debt causing your business to collapse? You’re not alone. Many business owners are acutely aware of the importance of maintaining healthy cash flow and sufficient liquidity, so don’t let one bad debt bring your company down.
Cash flow is the lifeblood of any business. It’s the money that comes in and goes out, and it’s what keeps the business running. When a company experiences a bad debt, it means that it’s not going to be getting the money that it was expecting. This can have a significant impact on cash flow, and it can make it difficult for the company to meet its financial obligations, dependent on liquidity.
Liquidity refers to a company’s ability to convert its assets into cash quickly and efficiently. In other words, it is the ease with which a company can access extra cash to meet its immediate financial needs, which might be vital in the event of an unforeseen bad debt.
Knowing your top customers and keeping track of their financial health is essential. However, monitoring this can be challenging, requiring companies to have robust systems and processes in place to manage credit risk effectively.