It has been a rough year with Covid-19 being the center of attention for not only our personal lives but for small businesses struggling to get back on their feet. Sometimes these unexpected events cause cashflow concerns for businesses.
Please be considerate. If you have an amount owed to you that goes beyond a year, it could be considered an uncollectable account. You should review your old accounts prior to your year-end and write off old amounts as either Bad Debt or place them into a holding account called Allowance for Doubtful Accounts.
A bad debt allows you to remove the revenue from the sale and reverse the HST you billed.
Allowance for Doubtful accounts will remove the amount from your ageing list but does not remove it completely in case, at some point, the client pays. Eventually, it may end up as a bad debt.
One of the past negotiating tools I have used if there was a client struggling, is to create payment terms. Sometimes that meant reducing the amount of the billing or allowing payment plans. It was better to get something rather than nothing at all.
An example: One of my clients was receiving no money and no communication from her client even though she was sending regular payment reminders. She got on the phone with her client and suggested he send her $100 a month until the outstanding amount was fully paid. It worked great – a few months later the amount owing was cleared up.
Do you need a hand collecting your money from your clients? We can help!