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In Businesses bad debts are inevitable, there are many reasons for it. But there are ways by which 'Bad Debts' and 'Daily Sales Outstanding' can be reduce and acceserate the funds flow and free up freezed funds which are vital for smooth functioning of any business.
The Chief Finance Officer should implement the following steps.
1. Credit Sales should be provided only to reliable & financially strong buyers.
2. The collection period should be shortened.
3. Proper follow-up need to be implemented to recover outstanding cash.
4. Automatic reminders has to be set-up to be send prior to the due date inorder to remind the debtors of their outstandind dues.
5. Invoices should be prepare free of errors to avoid queries & complaints which delays the payments.
6. Blocking of further credit sales to the buyers who default on their due payment.
7. Credit scoring and back ground credit checks on the buyers should also be done and those with poor records should be scrutinise further before releasing further credit sales.
8. Credit limit on regular defaulters is also a effective step.
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