Credit Management

Bad Debts and Your Business

At any time, but particularly in the prevailing economic climate, the rate of recovery of all outstanding monies owed to you is critical to the very viability of your business.

Rate of recovery affects cash flow, costing, overheads, growth potential and, of course, profits.

Unfortunately, the common law extends rather limited protection and remedies to creditors so that, in many instances, the recovery of small debts is not financially viable unless the business has taken certain contractual steps to protect itself timeously.

Research has shown that:

• The average debtor has a bona fide intention of meeting his obligations at the time of contracting.
• The average debtor settles only a portion of this outstanding liabilities at each month end. He asks the questions. "Who should I pay?" and "Who will wait?" i.e. he needs an incentive to pay your account in preference to others.
• Many businesses, who themselves suffer cash flow crises, have a declared policy of not settling accounts until they have to.
• The older the debt, the greater the risk of non-recovery and the greater the loss to your business in terms of initial costing and all other aspects. If one considers the inflation rate in recent years, businesses operating on small margins often lose on accounts recovered after 120 days.

Management

We have long since realised that effective credit management involves the preparation, implementation and management of a customised credit management programme tailored to the individual needs of our clients, a process which involves a great deal more than handing old accounts over to Attorneys after the bookkeeper has exhausted her repertoire of blue, green, pink and yellow begging letters, amusing cartoons and endless telephone calls, all of which costs the business irrecoverable time and money.

Effective credit management involves, inter alia:

• sensible criteria for the granting of facilities
• accurate information
• employment of properly trained staff
• provision of payment incentives
• contractual remedies to improve your common law protections and provide for legally recoverable interest
• a properly structured relationship between your credit management personnel and your Attorneys

No matter how effective your credit management, there will inevitably be times when you will be obliged to hand matters over to your Attorneys for collection.

We realise that when bad debts are handed to us for collection, the cost thereof needs to be commensurate with the debt recovered. This is why we believe in "customised collection packages" which suit the individual circumstances of our clients.

If credit management/recovery of bad debts poses a problem to your business, why not give us a call?