What is one advantage of screening debtors?

One significant advantage of screening debtors is the avoidance of future bad debts. This practice involves evaluating the creditworthiness of potential customers before extending credit. By carefully assessing the financial stability and repayment history of debtors, a business can identify those who are likely to default on payments. This proactive measure helps minimize the risk of incurring bad debts, which can harm cash flow and overall financial stability.

In essence, a robust debtor screening process contributes to healthier financial management and ensures that the company engages with customers who are more likely to honor their payment obligations. This can lead to more predictable revenue and ultimately supports the business's growth and sustainability.