When I started my first job, I met with our finance officer. She was looking quite stressed, so I asked what was going on. She explained she was working out how much of our ‘bad debt’ to write off as an organisation. I was confused, naively.
Turns out, this is probably what most people know, but every year companies and organisations write off debt. They decide that even if someone owes them £50, they are likely never to get that money back – in short, it costs them more to chase the debt, than they’d ever make getting it back.
But then, some enterprising people worked out that there was a market there. Now, companies can get some of that back. So rather than writing it off completely, and getting nothing back, they can sell that debt to a debt market, for around £5 (on average, 10% of the debt value).
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