Answer to Question #28246 in Finance for heela12

Question

how can a company attempts to reduce its problems of bad debts?

Answer 1

A bad debt is an account that a company has reported to the Internal Revenue Service (IRS), as a loss, for tax purposes, because it is not able to collect
it. A bad debt is then removed from company’s receivable listings. Many
companies will report accounts as bad debts when there has not been a payment
in 180 days. Banks can significantly reduce their bad debt levels by
identifying potential first-party fraud and abuse cases that should never be allowed
to reach the collection stages. Advanced analysts combined with cooperation
between fraud and risk departments are the key to early detection of threats
that may otherwise be invisible until it's too late to prevent large losses.
Also the risk of bad debts can be reduced by communication, and an effective
and efficient credit and collection policy. The policy can always be reversed
during more prosperous times. Reduce the credit limit on high-risk customers,
when payments are late or if there is too much other debt. This prevents from
making additional purchases especially during tough economic times when layoffs
are a possibility for many industries.