1. Is it always a good policy to reduce the firm’s bad debts by “getting rid of the deadbeats?”?

Question

1. Is it always a good policy to reduce the firm’s bad debts by “getting rid of the deadbeats?”

Answer 1

Do you mean deadbeat customers or deadbeat employees? Assuming you mean customers, a customer that does not pay is not really a customer, he is a donation - your donation. Getting rid of the deadbeats effects current or (especially) future revenue, not past revenue - even if you freely use a collection agency to collect bad debt. I think using a policy of "bad debt prevention" is better business than "bad debt collection." That said, any inflexible business policy, including deadbeat elimination, is also bad business policy.