Warning Signs That a Debt Is Becoming a Bad Debt

by Andrew Thomas Debt Recovery Rules and Limitations Related

Debt collection was, is and will always be a stressful thing for businesses and if engaged in this, businesses can waste a lot of time as well as money. The problem is that for most of them, there is some kind of outstanding debt and there are debtors as well. When they turn into bad debts, it becomes important for businesses to seek debt collection and debt recovery NSW services. There is one more situation, where it becomes very important to seek services from these agencies very urgently and that is of debtors turning into bad debtors. There are some signs that can help you identify very easily that the debtor is not in a mood to pay the debts back and we have covered some here in this article.

Acid-Test Ratio

Banking and financial institutions an also those offering debt recovery services must be well aware of what this acid-ratio test. Another name given to this test is "quick ratio test" and in a majority of cases, it is not used on individual debtors. This test is created mainly for businesses that have availed some kind of debt from lenders and banking institutions. This test is conducted to reveal the ability of the debtor to pay the debt back and if the result is less than 1, this means they don’t have enough cash to pay the debt back. In this situation, the lender can decide whether to engage in giving the debt or not and also what strategies to go with if the debtor shows his inability to pay the money back.

Disputes On Invoices Or Changing Terms

During the debt assignment, the lender as well as the debtor has to agree to specific terms and conditions. Both parties have to abide by some rules and if later when it’s time to pay the debt back, the debtor starts giving excuses regarding those rules, you should immediately understand that the debt is going to turn into bad debt very soon and that debt recovery agency should be introduced in the process.

Unanswered Phone Calls

Experts of debt recovery services say that repeated unanswered calls from the debtors are a sure shot sign that the debtor is not in a mood to pay the debt and that you need to put in some extra efforts in the process. In case, the calls are not answered, the next step is to send the letter and if that letter too stays unanswered, you should immediately seek services from a top notch debt recovery NSW agency. It’s important that as a business owner, you keep all the records of the entire conversation or the timeline so that they can be used by the debt collectors later in the recovery process. After this, if the debtor does not turn up or continues to avoid communication, you have perfectly reasonable grounds to send someone in person.

Apart from this, if the debtor has suddenly changed his business pattern and started complaining about dripped sales, you should take this too as a sign of the debtor trying to escape the debt. It becomes important in these situations that debt recovery NSW services are availed. The signs of this would include changes in the opening and closing time, changes in the working methods and also and also, the changes in the behaviour of the debtors while talking to the lenders.