Know Your Customer and Avoid Bad Debts (1)

Entrepreneurs take on new customers thinking it will make their business stronger, but the opposite is often the case as certain customers weaken businesses by draining resources and profitability.
To secure themselves against customer default, here is a four-point action plan of precautions SMEs need to adopt to avoid bad debt
1. Formalise an appropriate contractual agreement with their clients. These terms will include consent, interest on overdue accounts, and the ability to charge legal fees should customers default.
2. When a new client is on board you've got to do a proper "Know Your Customer" (KYC) background check on that company/individual to make sure that they are not involved in any fraud whatsoever – and that they are who they say they are.
3. Ensure that you have a good due diligence process both at the time of taking on a client and thereafter, monitor the client by doing regular assessments.
4. Perform annual reviews on clients’ businesses. Too often bad debts come from historical credit that may only now begin to affect the client's business' viability.