Top Secrets for Protecting Yourself from Bad Debts
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About this ebook
This book is designed to help you collect your money by establishing a good credit policy, so you can make the best decision about whether to extend credit in the form of money, work, or sales. Chapters cover establishing your financial policy, protecting yourself ahead of time, maximizing your personal security, extending commercial credit, and managing consumer credit risks.
Gini Graham Scott
Gini Graham Scott, Ph.D., CEO of Changemakers Publishing and Writing, is an internationally known writer, speaker, and workshop leader. She has published over 50 books with major publishers on various topics and has written over 3 dozen children's books. Her published children's books include Katy's Bow, Scratches, The Crazy Critters First Visit, and Where's the Avocado? published by Black Rose Writing. She has published 8 children's books through her company Changemakers Kids and is a member of the Society of Children's Book Writers and Illustrators. She does workshops on self-publishing and creativity. She also helps clients write books as a ghostwriter and self-publish or find publishers and agents. Her websites are www.changemakerspublishgandwriting.com and www.ginigrahamscott.com.
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Top Secrets for Protecting Yourself from Bad Debts - Gini Graham Scott
Top Secrets for Protecting Yourself
From Bad Debts
by Gini Graham Scott, Ph.D.
Author of a Dozen Books on Work and Professional Development, including Disputes, Disagreements, and All Out War and
A Survival Guide for Working with Humans
www.ginigrahamscott.com
Smashwords Edition
Copyright 2009 Gini Graham Scott, Ph.D.
Discover other titles by Gini Graham Scott at Smashwords.com
Smashwords Edition, License Notes
This ebook is licensed for your personal enjoyment only. This ebook may not be re-sold or given away to other people. If you would like to share this book with another person, please purchase an additional copy for each person you share it with. If you're reading this book and did not purchase it, or it was not purchased for your use only, then you should return to Smashwords.com and purchase your own copy. Thank you for respecting the hard work of this author.
Credit: Cover Photos by... Image 1 - Sergey Tokarev, Fotolia, Image 2 - endrille, Fotolia, Image 3 - ktsdesign, Fotolia
TABLE OF CONTENTS
INTRODUCTION: THE DIFFICULTY OF COLLECTING DEBTS
The Credit-Collections Connection
How This Book Will Help You
ABOUT THE AUTHOR
CHAPTER 1: ESTABLISHING YOUR FINANCIAL POLICY
Some Considerations in Setting Your Policy
The Link Between Credit and Sales
The Risks of Extending Credit
CHAPTER 2: DETERMINING THE RIGHT POLICY FOR YOU
Hard Line or Soft Line?
General Economic Climate
Where You Live or Do Business
The Nature of Your Business
Your Own Financial Strength
The Overall Stability of Your Clientele
Expanding Sales Versus Reducing Credit Risks
CHAPTER 3: PROTECTING YOURSELF AHEAD OF TIME
Accepting Checks
What to Check For
Why You Should Take Extra Precautions
What Can Go Wrong and How to Protect Yourself
Why You Can't Get Justice Right Away
Extra Precautions You Can Take
Waiting for Checks to Clear
Keeping Records of the Checks You Deposit
CHAPTER 4: MAXIMIZING YOUR PERSONAL SECURITY
Contracts and Promissory Notes
Writing Effective Contracts
Collateral
Obtaining Co-Signers
Conditional Sales, Consignment, and Inventory as Security
CHAPTER 5: EXTENDING COMMERCIAL CREDIT
Simple Credit Criteria
How Much Credit?
The Bank Reference
Checking Credit References
Sharing Credit Information
Evaluating Financials
The Balance Sheet
The Income Statement
Making the Credit Decision
CHAPTER 6: MANAGING CONSUMER CREDIT RISKS
Credit Cards
Setting Up a Credit Card Account
The Major Problems with Credit Cards
How to Offer In-House Credit Without Any Risk
Maximizing Your Cash-Based Transactions
The Application
Checking Credit and Bank References
Credit Bureaus
The Balance Sheet7
Setting Up Your Own Rating System
Managing Risks
RESOURCES AND REFERENCES
OTHER BOOKS BY THE AUTHOR
AUTHOR CONTACT INFORMATION
INTRODUCTION: THE DIFFICULTY OF COLLECTING DEBTS
For many people, the process of successfully collecting debts is fraught with conflict and uncertainty. You ask for the payment you have coming, the debtor gives you an excuse, and you don't know what to say next. Is the excuse really true? And even if it is, how do you convince the debtor to pay you?
Many creditors give up on collecting debts before they should because they fear the debtor's ill will. Some stop trying because they assume the debtor is a won't-pay deadbeat who has no money, when this is not the case. Still others give up because they aren't aware of the legal remedies available to them, and don't know how to show the debtor they are really serious.
On the other hand, some creditors become so emotionally involved and pursue their debt so energetically that they may end up owing the debtor money when the debtor sues for libel, slander, harassment, theft, assault, extortion, or other illegal collection practices.
If you want to collect the money people owe you, you need to know the rules of the collection game; then you can be creative within these general guidelines. Indeed, in many instances, it is necessary to be resourceful; you will be competing with other creditors for payment from a debtor who doesn't have enough to pay everyone, or who uses a priority system to pay the more important debts first. In that case you have to find a way to make your claim come to the top of the pile—or perhaps look for non-monetary alternatives to getting paid.
Of course, collecting what you are owed is only half the story. The other half involves taking preventive measures in advance to protect yourself from collection problems. Depending on circumstances, these measures can range from writing up effective loan agreements to making decisions about when to extend credit and to whom. A strong credit policy will help you decide under what circumstances you will extend credit—and how much you will risk.
The Credit-Collections Connection
Anytime you make an exchange with anyone and don't immediately get cash, you are extending credit. And that includes working for someone, accepting a check (in reality a promise to pay), billing someone for a product or service, or making a loan.
If you think about it, you'll realize that every society operates on some form of credit. Even a simple society that uses barter instead of money incorporates a credit system. Say a person performs some activity for another, such as working in a field sharing food from a hunt. That activity establishes a debt whereby the other person is expected to perform some reciprocal action in return--perhaps doing work in the future or sharing later from his own supply of food.
Thus, credit is, in a sense, the grease that keeps the wheels of society moving. Credit facilitates relationships: not every transaction can be immediately concluded with a payment in money, services, or products in return. But because the parties to a transaction agree or expect that reciprocal activity or payment will occur at or by a certain time, they can proceed with their current business, trusting that they will get paid.
In any situation where you extend credit, you have to determine an acceptable risk level. You must also realize that you are making a trade-off between your investment of time and energy in the transaction and your expectation of getting paid. In effect, there is a trade-off between sales and credit; if enough people refuse to buy from you without credit, your conviction that you are saving
money by refusing credit to your customers may come back to haunt you.
Extending credit can indeed increase the likelihood of making a sale. But the very act of extending credit brings with