What are bad debtors, and how do you deal with them?

 

What are bad debtors?

Bad debtors are customers from whom you still expect money. A debtor becomes doubtful when you establish that the chance of payment is minimal. In other words, you are not sure that this customer will ever pay their invoice.

Did you know that 30% of all invoices in Belgium are paid late? Or that 10% of all invoices are not paid at all? (Source: Graydon)

 

When do you book bad debtors?

You may book a debtor as doubtful as soon as you establish they are not going to pay the outstanding invoice. You must book this the moment you find out. In other words, you should not go back to the point in time when the debtor became doubtful. The example below makes this clear.

You sent an invoice to your debtor in September 2021 with a payment term of 30 days. Today, in March 2022, you find this invoice remains unpaid. When taking stock of the situation, you decide to contact your customer again. They inform you they can no longer pay the invoice because they went bankrupt in November.

You can no longer book this loss in 2021 because, at that time, you did not know your customer would go bankrupt. So, you must write off this debtor in 2022.

 

How do you encourage these defaulters to pay?

Is the payment of your invoice still outstanding? First, always contact your customer personally. Perhaps they have a good reason for not making the payment—yet. An agreement with an instalment plan may be a solution here. 

Is there still no response, even though it concerns an undisputed invoice? Unpaid can help you. After you have submitted the unpaid invoice to us, we will send a bailiff to your debtor within five working days, without the need for a judge or lawyer.

You won’t have to waste any time on your bad debtor and can focus 100% on your company’s core business.

Does your dubious debtor turn out to be insolvent? Then you will receive a free certificate of irrecoverability from us. With this, you demonstrate conclusively that the debt will not be paid, and you can still reclaim the VAT you have already paid.

Would you like some more information before using our services? Call us, without obligation, on +32 9 396 34 00 or schedule a video meeting at a time that suits you best.