What action should be taken at the beginning of a rental to manage bad debt?

• A. Skip deposits to save costs
• B. Take proper deposits
• C. Finalize rentals only in cash
• D. Sell additional insurance to clients

Answer: (B)

Taking proper deposits at the beginning of a rental is a key action to manage bad debt. A deposit acts as a form of security for the rental company, ensuring that there is a financial commitment from the renter. It reduces the risk of financial loss due to non-payment or damage to the rented property. By requiring a deposit, the company can create a more secure transaction, as it gives them a buffer in case the renter does not return the item or fails to meet payment obligations. This practice also encourages renters to be responsible with the rented items since they have a financial stake in the arrangement.

In contrast, the other choices do not provide the same level of security and may expose the business to higher risks of bad debt. For instance, skipping deposits might lead to increased financial losses as there would be no financial guarantee of the renter's commitment. Finalizing rentals only in cash may present its own challenges, such as limiting the customer base to only those who can pay in cash and not allowing for flexibility in payment methods. Selling additional insurance to clients might provide some financial protection, but it does not directly address the issue of upfront financial security, which is vital for managing bad debt effectively.