HOW TO PREVENT SITUATIONS WHERE DEBTS ARE UNCOLLECTIBLE

This time, six steps that will be useful for you as an entrepreneur in practical work with customers (debtors) to prevent situations where debts are uncollectible and become subject to corporate income tax.

#1 Prepare a contract that is favorable to you

Develop a contract form that is acceptable to you and—regardless of other circumstances—conclude written purchase and sale agreements with regular customers!

On a rainy day, these will help you understand the basic terms of the transaction—identifying the business partner, recording contact details and authorized persons, defining the transaction structure, and, most importantly, the payment terms and penalties for late payments.

Motivate the buyer! Include terms where, if the buyer pays within 1–3 days after the transaction, you grant them at least a symbolic payment discount (usually 2–3%). This will greatly increase the buyer’s desire to cooperate with you in larger volumes.

By the way, supermarkets that exploit their position tend to issue a 3% invoice if you want to receive payment from them in less than 90 days. That happens too…

If there is a contract and a dispute arises with a buyer regarding debt payment, any lawyer you hire to help recover the debt will be grateful to you.

#2 Offer prepayment terms

When working with one-time buyers and clients, do not allow post-payment terms! Always issue an advance invoice before the transaction and wait for its payment, verifying it yourself. Check your bank account before issuing a waybill for goods or an invoice for services and delivering the respective goods or services.

#3 Remind them of the payment deadline

As the payment deadline specified in the contract approaches, ensure that the sales manager sends a polite reminder to the buyer—usually to the responsible person via SMS or email—that the payment deadline is near.

#4 Send words of gratitude

If the buyer has paid on time, ensure that the sales manager sends them sincere words of gratitude! This is especially important at the beginning of the cooperation, as it creates a psychologically pleasant atmosphere and a feeling that the buyer is valued.

#5 Remind them of the delay

If the buyer slightly delays the payment deadlines specified in the contract (usually 3–5 days), ensure that the sales manager sends a slightly more direct reminder to the buyer regarding the payment delay, granting an additional period of 2–3 days to settle the debt without any penalties. This works because, in 90% of cases, such late payers settle their invoices immediately after such a reminder.

#6 Gently threaten with debt collection

If none of the above-mentioned debt monitoring techniques work and the delay already exceeds a month, consider starting cooperation with a debt collection agency—preferably a local one, as they are more flexible in their approach. If the payment delay extends beyond 2 to 3 months, the chances of recovering such a debt usually decrease sharply…

Entrepreneur, be responsible in working with your debtors! This will promote the sustainability of your business.

By the way… Understanding that an entrepreneur’s true element is closing deals, we offer this debt monitoring to our clients as an additional service.

P.S. Next time, you will learn how your doubtful debts affect the Corporate Income Tax payable to the state budget.