Avoiding Bad Debtors and Bad Decisions: A Survival Guide by Debt Free
Bad debt is a bit like a leaky roof; you don’t notice it when the sun’s out, but once the storm hits, it’s catastrophic and expensive.
At Debt Free Ltd, we’ve seen more invoices go missing than jandals at the beach. Friendly clients who suddenly “can’t talk right now”, payments that “should be showing in your account”, and business owners who trusted a handshake.
Why Bad Debt Is the Silent Business Killer
You can have the best tools, the hardest-working team, and a calendar booked out like a summer campground… and still run out of money if your customers don’t pay on time.
In New Zealand, one of the biggest reasons businesses fail isn’t lack of work; it’s unpaid invoices. Cash flow issues sneak up quietly, then hit harder than an enraged prop.
The solution?
Solid systems. Legal protection. And a lot less hoping for the best.
Get Your Terms & Conditions Sorted (Before You Supply Another Thing)
If you don’t have enforceable Terms & Conditions, you’re basically lending money with crossed fingers.
Your Terms should cover:
- Interest on overdue invoices (because late paying shouldn’t be free)
- Recovery costs (so chasing debts doesn’t cost you more)
- Security clauses so you’re not last in line in liquidation
- Personal guarantees (because empty companies can’t pay bills)
If your Terms were written years ago, by “a mate who’s good with words”, it’s probably time for a grown-up version.
Credit Check New Clients (Because Nice Blokes Don’t Always Pay)
Before you extend credit, check who you’re actually dealing with.
A credit report tells you:
- If they pay others on time
- If they’ve got financial trouble brewing
- If suppliers are already avoiding them like a dodgy flatmate
A clean shirt and a good yarn don’t mean good credit.
We partner with Centrix, New Zealand’s leading credit bureau, so you get real data, not gut feelings.
Set Credit Limits (And Stick to Them)
Set a credit limit. Respect it.
And don’t “just one more job” your way into disaster.
If a client wants more credit, approve it before you supply, not after your invoice becomes a problem.
Credit limits aren’t being mean. They’re being smart.
Incentivise Early Payment (Kiwis Love a Good Deal)
Early payment discounts work because:
- Everyone loves saving money
- Nobody loves paying invoices
Just remember:
- Enforce your rules
- Late = no discount
- No emotional appeals accepted
Discounts reward good behaviour.
They aren’t sympathy payments.
Invoice Fast (Not When You Remember)
The longer you wait to invoice, the longer you wait to get paid.
Send invoices:
- Immediately
- Electronically
- Clearly
- With due dates that don’t require an interpreter
If your invoicing system is slower than rural broadband, it’s costing you money.
Follow Up Quickly (Silence Is Not a Good Sign)
If a customer starts:
- Paying slower
- Dodging calls
- Saying “we’re just waiting on approval”
That’s not admin. That’s your early warning system screaming at you.
Ignore it… and you’ll be the one left holding the bill when liquidation hits.
A Few Smart Extras (For the Business Owner Who Wants to Sleep at Night)
Not every late payer is a villain. Sometimes:
- There’s a real dispute
- Their system failed
- Cash flow is messy
Your job?
- Find the problem
- Deal with it early
- Get agreements in writing
And if it keeps happening? Stop being patient and start being protected.
Bottom Line
Bad debts don’t just “happen”.
They happen when businesses trade on hope rather than on systems.
At Debt Free Ltd, we help New Zealand businesses:
- Secure their invoices
- Know when clients are in trouble
- Become secured creditors
- Avoid clawbacks
- Recover debts legally
- Trade with confidence
Being busy doesn’t mean much if you’re not being paid.
If your invoices are giving you headaches… It’s time to stop chasing and start protecting your cash flow and your sanity.
Mark Mclachlan
