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Outline two methods a business may use to minimise bad debts - Leaving Cert Business - Question 6 - 2017
Question 6
Outline two methods a business may use to minimise bad debts. (i) (ii)
Worked Solution & Example Answer:Outline two methods a business may use to minimise bad debts - Leaving Cert Business - Question 6 - 2017
Step 1
(i) Assess Credit History / Credit Worthiness:
Answer
A business should check the creditworthiness of potential customers. This involves reviewing bank references, trade references, and credit bureau reports to ensure that the customer is likely to pay their debts on time. By assessing credit history, the business can make informed decisions about extending credit to customers.
Step 2
(ii) Set Credit Limits and Issue Invoices Efficiently:
Answer
Another method is to set appropriate credit limits for customers and to ensure that invoices are issued promptly. Establishing clear terms and conditions regarding credit periods can help manage the amount of credit extended to customers, while sending invoices in a timely manner ensures that payments are requested and followed up regularly.