Act now on bad debts

SMALL businesses need to act now to decide if bad debts are recoverable or should be written off, debt collection agency Prushka says.

Chief executive Roger Mendelson said many business owners forget to review debts until the end of the financial year.

To obtain a tax deduction for a bad debt, businesses must treat it as such before June 30.

"It is not sufficient to wait until preparation of accounts after the end of the financial year,'' Mr Mendelson said.

He said business owners should:

• Obtain a print-out of their debtors ledger well before June 30
 
• Mark down those debts where bankruptcy or liquidation has occurred

• Make a note of all debts which are more than six months old

• Note on a ledger the debts which are being treated as bad, ensuring the entry is dated.

If a collection agency recovers a debt after June 30, the recovered amount can then be brought back in as income.