Bad Debt
Mistakes can be expensive – particularly if you do not learn from them. Mistakes that are repeated can create a massive hole in your wallet.
When a company has a bad debt write off, it may be within the company’s best interest to evaluate and examine whether or not the credit risk was properly handled and monitored. Also, it is important to determine whether or not the account was managed correctly when there was reason to believe the customer was financially compromised. These may be some important questions to ask:

  • Who was involved in making the credit decision?
  • Was everything properly documented?
  • When was the last time the credit file was updated?
  • What occurred to indicate that the debtor was financially compromised, and what was done about it during that time?
  • What was done to collect the balance owed?
  • How long did it take for management to be informed of the issue?
  • Were appropriate measures taken to prevent the problem initially, and to mitigate damage done to the creditor company once the problem came to light?

An objective review of the credit situation is imperative, and should be examined with the whole credit team. The reason behind this is not to embarrass any member in the team, but to encourage growth. This will in turn (in theory) reduce the chances of the company losing money because of a similar problem sometime down the road.
 
St. Petersburg Debt Collection Attorney

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