Debitoor's accounting dictionary

Default - What is default?

Default is the failure to make on-time payments on an amount owed

Maintaining solid, professional accounting practices is essential for the success of a business. Make sure yours are in order with Debitoor.

Generally, default refers to a company or individual who fails to make payments or interest payments on time.

It typically applies to loans taken from a bank or provider and can lead to declaration of bankruptcy or loss of assets (collateral) that will be used to pay off debts.

Assets can be seized by authorities or collection agencies if a business is continually unable to make payments.

The implications

For a business, to default means serious financial difficulties. It can have an impact on future lending ability, as lenders view a default as an inability for that company to make payments, as well as an indication of financial instability.

Default prevention

The only way to prevent defaulting on loans or debts is to keep thorough records of your financial transactions and maintain an understanding of cash inflow and outflow for your business.

When a company’s expenses regularly numbers higher than its income, that business is in jeopardy of being short of the cash needed to meet payment deadlines.

Debitoor’s online accounting and invoicing software gives you an immediate overview of your company’s financial standing. See how much money you’re owed by customers, what expenses you’ve incurred, and whether your cash flow is balanced.

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