Re: Business Question

Bad debt is a standard business expense. Sometimes it is more profitable to
grab debts that will have a higher proportion of uncollectability with the
higher price that that particular market segment will bear.

It's not about minimising absolutely. It's about picking it's level for the
cutomers you have and ensuring your pricing covers it.

What the poster here is describing is a change to his customer base that is
definitely an increase in the risk of bad debt in a 30sec risk assessment -
right or wrong for this particular customer. His percentage of bad debts to
revenues needs to be increased. And prices adjusted upwards to cover it -
not for this particular customer - but for his revenue base as a whole.

Think of it this way. To check this client out further will cost you
resources. So it is already an extra cost that must be recovered.

Or put it this way. If you don't have a little bit of margin you have been
putting aside for the bad debt that will eventually come, it is only a
matter of time before you get caught short.

I know, it's simplified and is not as simple as that, but at the least that
kind of thinking needs to be a part of this discussion in my view.

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