Bad debts and bad debt recovery are very important in some cases, especially when part payment is made by the client or customer. Bad debt is an amount that is not realized by the debtor is called bad debts. In this debtor is a person from whom we have to receive money. If the debtor fails to pay the money then the amount that he fails to pay is called bad debts. It is a loss and all losses are categorized into nominal account. The rule for a nominal account is the debt is all expensive and losses hence the entry will be bad debts account debuted to debtors personal account. If the debtor fails to pay the entire amount then it is called bad debt but if a part of the amount is received and part of the amount is not received in that case the entry will be cash account debited and bad debt account debited to debtors’ personal account. The cash account will be debited with the amount that we have received, the bad debt account will be debited with the amount that we have not received. So, this is all about bad debt now, the question is how to recover your money legally? If a debtor who has not paid the money to us is declared as bad debt and his account is written off as ‘bad debts’ in the future or after a few days he pays the money then that money is known as bad debt recovered. The entry that we will pass is cash or bank account debited to have debts recovered.
How to recover payment from clients?
The very first principle for the recovery of money is to take quick action ideally you should have a credit period of only sixty days. The second point is to have a multiplicity of litigation you can start with the civil action preceded by the action under negotiable instrument act if you have the cheque and then third and last you can also file criminal litigation or the breach across and cheating and there is another angle to it if your debtor or their debtor is the company you can start processing under the bankruptcy act in NCLT. Apply pressure in the court to take a shorter date and also get a local commissioner appointed in your matter to put you’re proceeding on the fast track. And you can also apply pressure outside the court and also during the negotiation and mediation which would help you to recover your money in a very peaceful manner and a fast track manner. And the fourth point to consider in recovering money is to have a cut out time remember everything starts for the recovery of the money is from a cause of action and your last cause of action would mean that the law of limitations starts from your last cause of action and the law of limitation says that you can only file your recovery suit within three years yes you get me right within three years from the last call of action. For the criminal complaint about cheating, there is no law of the limitation applies but yes in the civil proceeding there is. So, remember to have a cut-off time, and you file your suit within the limitation period.
How to deal with clients who won’t pay?
The first ste0 to deal with the client who won’t pay up is to figure out why often knowing why can be the difference between getting paid and not getting paid and there are three probable reasons why the client won’t pay firstly- the client doesn’t have any money and second, the client isn’t happy with the service. For instance, if a client doesn’t have the money to pay if this is the case then understand that it is not a reflection of you or your product or your service also understand that just because they can not pay now does not mean they won’t be able to pay you in the future and handling the scenario the right way is key if a client reaches out to you and explains that money is tight and they need an extension do not lose your coop if you do you risk the client shutting down completely and changing their mind from I will pay you in the future to screw you instead, kill them with kindness tell them you empathize with their situation and are willing to put their account on hold or work out a new payment plan this is obvious this would not be ideal for you and your business but it is better to get paid eventually than to not get paid at all. Plus a lot of times people who are struggling to make their payments do want to make them and by offering them another solution they will be grateful and they will work even harder to make sure they pay you back.
Conclusion-
So, hope the above content helps you and your business to recover your money considering all these aspects.