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Newsletter: September 2008
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How you can protect against bad debts
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Dear
In this issue we focus on how bad debt protection works. Sadly, it's all too easy for a business to become the victim of bad debt. Read on for more details, as well as our top tips about how to gauge a customer's credit-worthiness.
Also: a look at what's different in factoring these days and our predictions for what will happen next...
With kind regards,
Sean Morrow
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Bad debt protection: what you need to know
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In our last newsletter we talked about the case for bad debt protection (through factoring or invoice discounting) to counter rising bad debts.
How does bad debt protection work?
For every new prospective customer, you give their details to the factor who first checks the financial standing of the business and then issues you with a credit limit. You may then sell to the customer up to that credit limit and be protected against the customer being unable to pay you due to insolvency.
In some cases the factor will also protect you against protracted default (when the customer doesn't pay for an extended period, but their business doesn't actually fail).
Now is a good time to check the details of any protection you already have in place, as often these conditions are only appreciated once a bad debt has been incurred and you discover you're not adequately covered.
Read more about this subject on our website - where can also watch a short video in which Glenn Blackman of Cashflow Acceleration explains the benefits of bad debt protection.
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Times are changing for factoring
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We've been in the factoring business for many years, and we've seen a lot of changes. For example, the ways that factoring companies charge for their services.
In this, the first of a series of short articles, we look at what these changes mean to you and the reasons behind then. We also make some predictions about where it's leading. If you're using factoring or invoice discounting and want to better understand the differences between factoring companies and their offerings, we recommend you take a look...
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TOP TIPS: BEFORE YOU OFFER CREDIT...
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1. Always confirm the exact trading name of the customer e.g. XYZ Limited. This may make a big difference should you ever have to take legal action
2. Offer the minimum credit period that will be competitively acceptable
3. Confirm all contact details: addresses, phone numbers, fax numbers, mobile numbers, email addresses
4. Trade references can be helpful, but then again most businesses will have at least a couple of customers that will speak well of them
5. Consider buying credit information about customers - there are a number of providers
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For all Eight Top Tips read the full article here... or watch our short video on good credit control.
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