Bad Debt

June 20, 2022  •  Leave a Comment

CuriousCurious Bad Debt

 

Bad debt occurs when an individual or company is planning to receive money (typically after they have provided a service or product), and that payment is not made.  Sadly, bad debt occurs more often than what we would like to think it may happen. Although there may be reasons why a debt is not satisfied, but it still adversely affects the one who the debt is owed.

In the photographer and modeling field, if a professional is booked for a certain fee, that model expects that fee on a certain date much like many expect a paycheck on a certain day.  If that booking is cancelled or lost for any reason, this represents a loss of potential income. If effort is made in preparation, travel, supplies, location rental, etc.. this represents an actual loss of income based on preliminary services provided which were not reimbursed or in other words, bad debt.

Any professional agent should be able to absorb a small amount of bad debt, however sustained exposure to bad debt experiences will clearly have an adverse effect on the professional providing the services and even in a broader sense to future business clients. As the cost of achieving a profit becomes more difficult, the price of services or products will often increase and may even be more difficult to obtain. The cost of doing business and profit margin will vary greatly from person to person and there are many great resources on the internet to help anyone determine their break even point as well as desired profit margin for example CODB.(The info here is dated, but consider the principles).

Some individuals will request a deposit on services or products depending on the size of the business. This may lessen the burden of bad debt but also may limit customers unless the service is very well known. Some agencies may even require the entire amount upfront in a non-refundable status. This of course also has the potential to limit customer engagement.

Force majeure a common clause in contracts which essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a warstrikeriotcrimeepidemic or sudden legal changes prevents one or both parties from fulfilling their obligations under the contract. Explicitly excluded is any event described as an act of God, which covers a separate domain and legally differs, yet it is still related to contract law. In practice, most force majeure clauses do not excuse a party's non-performance entirely but only suspend it for the duration of the force majeure

Unfortunately there are those in the industry who take obligations very lightly. In most industries a set of rules of guidelines are in place that often holds participants accountable though a variety of means. Active communication is often the key here and one only needs to causally browse the forums to find words like 'flake' or 'ghost.'  Not honoring an obligation without just cause not only hurts the person providing the service, but eventually may affect the reputation of those people who make bad choices.
 


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