Bad debts are a huge problem. Bad debt collection is an even bigger problem. When a debtor has stopped making payment months or years ago, the debt is considered a bad debt. This debt can be written off and declared as a loss. The problem is that banks, lending companies, and smaller creditors need to survive.
If they keep on declaring bad debts as losses, they will keep losing money. For smaller businesses, it means valuable money that could have been used for operational expenses. More importantly, if bad debt collection doesn’t happen, debtors will assume that their creditors will just let them off the hook.