How does bad debt impact your company

Bad debt is a type of debt that you can’t get back. People assume debt is bad, but it’s not. Many businesses in Singapore have debt, and a lot of it is good debt. Good debt is where you’re almost certain to get the money back. If it’s lent with interest, it’s going to eventually lead to a profit.

So how does bad debt impact your company?

Makes Your Company Poorer
This is obvious.

Bad debt makes you poorer. A company in Singapore that lends money wants a reasonable chance of getting it back. Without that money, they’ve thrown their currency into a black hole that’s never going to spit it out.

Companies with a lack of money are likely to run into problems later on.

Hurts Investor Confidence

It’s difficult to secure investment money when you’re covered in bad debt. Anyone looking at a business in Singapore wants to know they’re diligent and aggressive.

The impression a company with a lot of bad debt gives is one of irresponsibility. It demonstrates you’re making bad decisions. It reflects poorly on the management of a business.

Derails New Projects

Large companies in Singapore could have millions in debt. When this is good debt, it’s perfectly fine because they can get this money and use it to pay their expenses and build new projects. On the other hand, bad debt means they have to write that money off their balance sheets.

Once that money is gone it can hurt an organisation’s ability to raise new projects and invest in its future.

The derailment of new projects is not something to take lightly. In the long-term, this can impact the sustainability of that business.

The fall of a Company

In extreme cases, too much bad debt can mean the end of a company. With a lack of money from debts coming in, they could run out of money to fund their day-to-day operations. If this happens, the following chain reaction happens:

  1. The company cuts jobs.
  2. The company cuts projects.
  3. The company becomes less profitable.
  4. The company takes out loans to support itself.
  5. The crisis continues until the company folds.

As you can see, too much bad debt can make this reality a real possibility. If you want to reduce your bad debt, use a licensed debt collector in Singapore. They will be able to make sure your debtors pay you what they owe.