Bad Debt

Accountants consider bad debt to be an expense. It is moneys due that can no longer be collected and have to be written off as lost. Bad debt is also incurred if it is considered a prohibitive expense to collect the money, and not worth it.

There can be several reasons why the moneys cannot be collected. Clients may default on payments because they do not have the money to pay or because they cannot be found in order to be forced to pay the debt.

Accountants have to make provision continually for accounts that are receivable, but that are estimated not to be collectible. At the end of each accounting cycle, they have to reconcile these accounts and write off as bad debt the accounts that were not collectible.

A debt is regarded as a sum of money owed, arising out of a creditor-debtor relationship, that can be considered an enforceable obligation. A debt can be completely worthless if it is deemed uncollectible, or partially worthless if there is a reasonable prospect that a part of the amount may be recovered in future, such as the proceedings forthcoming from a liquidation procedure.

People who have been noted for bad debt are reported to credit bureaus. Credit providers check credit bureaus’ records and would not extend credit to a person listed there, since the person would be regarded as a risk, and may default again. Millions of people and businesses are listed at the credit bureaus, both the good and the bad payers.

Some lawyers specialise in bad debt collection. They may sometimes even go as far as to only charge for their services if debt were collected, on a “no money collected, no fee” basis. They do not charge fees upfront, but they take a percentage of the debt collected once they have collected it. In many cases, businesses can recover at least some of their receivables this way.

• Bad Debt
• Debt Repayments
• Debt Control Management
• Debt Counselling
• Debt Counsellors

For more information contact our call centre on 0861 21 22 23.