{"id":97,"date":"2021-11-22T15:29:48","date_gmt":"2021-11-22T09:59:48","guid":{"rendered":"https:\/\/www.zikzuk.com\/blog\/?p=97"},"modified":"2022-11-16T17:59:51","modified_gmt":"2022-11-16T12:29:51","slug":"the-impact-of-bad-debts-on-an-sme","status":"publish","type":"post","link":"https:\/\/www.zikzuk.com\/blog\/the-impact-of-bad-debts-on-an-sme\/","title":{"rendered":"The Impact of Bad Debts on an SME"},"content":{"rendered":"\n<p>Businesses rely on income received from sales to pay off their expenses and other company operations. However, in every organization, there\u2019s some uncertainty of debtors not paying dues&nbsp;because of an unexpected liquidity crunch. Especially during the pandemic when many businesses have faced losses, bad debts have become common&nbsp;across every industry.&nbsp;&nbsp;<\/p>\n\n\n\n<p>An increase\u00a0in\u202fbad<strong>\u00a0debts<\/strong> has\u00a0various consequences. They are:\u00a0<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Difficulty paying business expenses:<\/strong>\u202fAn increase in bad debts can sometimes lead to a serious cash crunch, making it challenging to pay day-to-day expenses&nbsp;like&nbsp;mortgage interest, insurance, utilities, repairs, etc.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Payment to suppliers:\u202f<\/strong>Businesses need to&nbsp;pay&nbsp;suppliers or creditors, and bad debts&nbsp;lead to negative&nbsp;<a href=\"https:\/\/www.zikzuk.com\/blog\/how-to-manage-cash-flow-issues-in-a-wholesale-business\/\" target=\"_blank\" rel=\"noreferrer noopener\">cash flow,<\/a>&nbsp;further&nbsp;leading&nbsp;to late payments. Doing this&nbsp;can&nbsp;harm&nbsp;the supplier-buyer relationship.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Increase in&nbsp;working&nbsp;capital requirement:<\/strong>\u202fIf a business does not receive cash smoothly, it will need to borrow from outside in terms of an overdraft, loans, etc.&nbsp;Long-term lending eventually leads to taking up working capital loans with higher interest rates that may cause a cash crunch in future.&nbsp;&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Increase in losses:<\/strong>\u202fA money once turned into bad debts is&nbsp;equal&nbsp;to the money lost. An increase in bad debts leads to an increase in losses and hence affects the business&#8217;s profitability.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>However, to help a\u00a0business control bad debt,\u00a0ZikZuk\u2019s\u00a0<strong><a href=\"https:\/\/www.zikzuk.com\/bfm\">Business\u00a0Finance Manager<\/a><\/strong>\u00a0has come up with various measures. They are:\u00a0<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Credit control<\/strong>&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>For any client or customer, a business can set a credit limit, and if once crossed, it will trigger and show the same on the system.&nbsp;This&nbsp;helps&nbsp;the business to limit the losses by keeping a check on the credit provided to them.&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Aging analysis of debtors<\/strong>&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>Aging analysis list down unpaid customers with ranges.&nbsp;For e.g.,&nbsp;you get a separate view of&nbsp;overdue&nbsp;invoices which are&nbsp;30 days&nbsp;old or less, with&nbsp;invoices&nbsp;above&nbsp;31-60 days&nbsp;old&nbsp;and so on. This categorization&nbsp;helps&nbsp;the&nbsp;businesses to&nbsp;analyze&nbsp;debtors&nbsp;better.&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Reminders\/Communication<\/strong>&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>Reminders are critical in decreasing the chances of bad debts. And hence, on a set due date,\u00a0ZikZuk\u00a0BFM, which gets your\u00a0<strong><a href=\"https:\/\/www.zikzuk.com\/blog\/why-use-tally-on-mobile-with-zikzuk-bfm\/\">Tally\u00a0data\u00a0on mobile<\/a>,\u00a0<\/strong>sends\u00a0automated reminders to customers\u00a0to clear their\u00a0payables.\u00a0This\u00a0not only decrease the chances of bad debts but also will help in recovering cash early.\u00a0<\/p>\n\n\n\n<p>If you want to discover the best solution\u00a0to keep your\u00a0bad debt\u00a0risk to a\u00a0minimum, visit\u00a0<a href=\"https:\/\/www.zikzuk.com\/\">Zikzuk<\/a>\u00a0BFM<a href=\"https:\/\/www.zikzuk.com\/bfm\" target=\"_blank\" rel=\"noreferrer noopener\">,<\/a>\u00a0a\u00a0<strong><a href=\"https:\/\/www.zikzuk.com\/blog\/why-do-todays-businesses-need-a-business-intelligence-platform\/\">business intelligence platform<\/a><\/strong>\u00a0to learn how\u00a0we\u00a0can help your business\u00a0run smoothly.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Businesses rely on income received from sales to pay off their expenses and other company operations. However, in every organization, there\u2019s some uncertainty of debtors not paying dues&nbsp;because of an unexpected liquidity crunch. Especially during the pandemic when many businesses have faced losses, bad debts have become common&nbsp;across every industry.&nbsp;&nbsp; An increase\u00a0in\u202fbad\u00a0debts has\u00a0various consequences. They&#8230;<\/p>\n","protected":false},"author":2,"featured_media":98,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[15,7,21],"class_list":["post-97","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized","tag-business-finance-manager","tag-business-financial-management","tag-business-intelligence-platform"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v17.9 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Business Intelligence Platform | Tally Data on Mobile<\/title>\n<meta name=\"description\" content=\"Send automated payment reminders to customers using ZikZuk BFM, a Business Intelligence Platform that provides Tally data on mobile, and reduce the 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