The impact of bad debt on sales and profit for your business can be a serious one. Bad debt can put a stranglehold around a business that will eventually lead to bankruptcy and a destroyed professional reputation.

Debt collection is embarrassing, both financially and personally for a business owner. Whether the unpaid debt is indicative of problems that may be of the business’ own making or the result of an economy in recession, but the result is the same. When a commercial collection agency gets involved it’s already too late to save your good name and may be the first step towards bankruptcy court. Debt collection against your business assets should be avoided at any cost.

Sales suffer when word gets out that your business has been turned over to a commercial collection agency. Confidence in your business is the foundation for your sales and reflects either favorably or unfavorably on how your customers view your products or services. If consumers fear that your business is unstable and untrustworthy, this fear will carry over onto your product line. Consumers may question your ability to honor warranties and whether you will be there to accept returns or make exchanges. Consumer confidence is critical to successful sales and the appearance that your business is in financial trouble may cause your sales begin to plummet.
Sales mean profits and the converse is also true. If your marketing strategy is failing due to commercial debt, your profits will dive as well and further complicate an already unfavorable financial situation.

A commercial debt collector can sometimes handle things discreetly and avoid unnecessary publicity concerning the financial stability of your company. Working closely with a commercial debt collector can minimize the effect that bad debt has on your sales and profits.

Bad debt can also hurt your sales and profit margin by causing you to be turned down for additional credit lines during crucial times. Regular debt is incurred when ordering raw materials or supplies, when opportunities are experienced that require capital outlay, or when normal and expected seasonal slow-downs occur. This cycle of debt and repayment is standard operating procedure and a fundamental requirement for doing business. If bad debt prevents you from borrowing and destroys your credit, your business may not survive the ebb and flow of the business world and you may not be able to borrow the funds needed to survive.

Sales and profits may suffer when your debt prevents your retaining important employees. Hiring the right people is one of the wisest things a business owner can do. They literally make or break the business. Bad commercial debt presents the strong possibility of losing those valued employees because of the lack of your business’ ability to provide insurance, give raises, and award bonuses. If word gets out that your business has been turned over to a commercial debt collector, employees may see the writing on the wall and start looking for other employment. If hiring the right people is important, retaining them is just as important.

Bad debt can and does adversely affect your sales and profit margins. Avoiding bad debt is the preferred course of action but it isn’t always possible. If your debt is being handled by a commercial debt collector, cooperate as fully as possible to reduce the damage to your business. Bad debt can be handled in such a way that your business survives and becomes profitable once again.