How to confirm bad debts

The confirmation of bad debts can start from the following aspects:

1, aging analysis: check all accounts receivable overdue for more than a certain number of days. Generally speaking, the longer the overdue period, the greater the possibility of bad debts.

2. Customer communication: take the initiative to contact customers in arrears to understand their willingness and ability to repay. If the customer is unable to repay or refuses to repay, it should be considered as a bad debt.

3. Risk assessment: Assess the possibility of bad debts according to customers' credit records, historical transactions, industries and market environment.

4. Approval process: establish a bad debt approval process and stipulate the approval authority of different amount ranges. For large bad debts, the approval of senior management or the board of directors is required.

5. Legal procedures: Before confirming bad debts, you can consider taking legal measures, such as sending a lawyer's letter to protect the rights and interests of the company.

6. Alternatives: Before confirming bad debts, we can try to take other measures, such as debt restructuring and creditor's rights transfer, to minimize losses.

7. Documentation: Ensure that all documents and records related to bad debt confirmation are properly kept for future audit and verification.

8. Continuous monitoring: Even if a sum of money has been confirmed as bad debt, it still needs continuous monitoring to prevent the possibility of recovery in the future.

Ways to avoid bad debts:

1. Strictly screen customers: Before cooperating with customers, a detailed credit survey should be conducted to understand the credit status and historical performance of customers and avoid cooperating with customers with bad credit.

2. Clarify the terms of the contract: clearly stipulate the repayment method, repayment period, liability for breach of contract and other terms in the contract, so as to take corresponding measures when the customer defaults.

3. Regular reconciliation: reconcile with customers regularly to ensure that the accounts of both parties are consistent and find possible problems in time.

4. Timely collection: Once customers are found overdue, collection measures should be taken immediately to avoid bad debts.

5. Establish a risk early warning mechanism: By establishing a risk early warning mechanism, we can find the abnormal situation of customers in time and take corresponding measures to prevent bad debts.

6. Diversified payment methods: cash, bank transfer, third-party payment and other payment methods are adopted to reduce the risk of bad debts.

7. Training employees: training employees in credit management to improve their credit awareness and risk prevention ability.

8. Establish and improve the internal control system: By establishing and improving the internal control system, ensure that all systems and measures are effectively implemented and prevent bad debts.