Debtors overdue

[Bobby Knight]

Has anybody found a reliable way to get in bad debts?

My business turnover is about R1.2m per year, yet my debtors book is just over R1m. I prescribe to Accountability and have used an attorney. All with basically zero results. As I understand I cannot take them to small claims court (as a business) Problem wit suing them is that it costs me legal fees to sue (which I know I can add to their account) and then they agree to pay R250 per month. Two months down the line they stop paying again (not even covering the legal costs yet) and I have to take them to court again...

Please can somebody point me in the right direction?

[Blurock]

The only advice I can give is that cash is king. Dogs can be trusted, people not.

I would rather turn business away than to give one cent of credit. The reason for this is that I have lost all faith in our legal system.
I have had judgments and attachment orders served on debtors only to have the Sherriff's notice that he "cannot get access to the premises; the debtor has left the address and is untraceable" or some other lame excuse to protect a "Brother". Gangsters rule!

[Derlyn]

Good advice Blurock.

Not an easy situation to recover from.

Going forward, don't start any job or supply anything unless 60% has been paid up front. That's already 60% of your problem eliminated.

My late dad always said "R1 in your pocket is better than R10 in the book". I took his advice and am forever gratefull that he hammered that into me.

My advice is not to dwell on trying to get that money. Start over with a new business model and remember in order to give credit, legally, you must be a registered credit provider. I often use that as motivation to get the client to pay upfront.

Good luck.

[Dave A]

My business turnover is about R1.2m per year, yet my debtors book is just over R1m.

That is a particularly bad debtors book profile!

Let's break the big number down to understand it better -
How much of that debt is not overdue?
How much of that debt is less than 30 days past due?
How much is more than 180 days past due?

And then let's look at how you might be contributing to the problem -
What credit terms are you giving as standard? And why?
How do you pre-qualify your prospective debtor?
Do you ask for cash up front or COD?
If yes, do you incentivise payment up front or COD?

[Bobby Knight]

That is a particularly bad debtors book profile!

Let's break the big number down to understand it better -
How much of that debt is not overdue?
How much of that debt is less than 30 days past due?
How much is more than 180 days past due?

And then let's look at how you might be contributing to the problem -
What credit terms are you giving as standard? And why?
How do you pre-qualify your prospective debtor?
Do you ask for cash up front or COD?
If yes, do you incentivise payment up front or COD?

60 days and older is R490k

Contributing to the problem is that my business partner focusses on debtors and creditors, while I focus more on staff issues (20 staff) and driving sales. This has obviously gotten out of hand, and some people that was already over 90 days was, yet again, allowed to buy on their account. This (including the VAT I have to pay on money not yet received) is killing my ability to pay my creditors on time. This causes losses with regards to settlement lost, and sales lost because my supplier account gets put on hold for late payment.

[Dave A]

This has obviously gotten out of hand, and some people that was already over 90 days was, yet again, allowed to buy on their account.

Yes, you absolutely have to stop that.

You need to have a clear line where you stop supply, and what it will take before supply will be resumed.
And make sure everyone in your business is on the same page and absolutely consistent. Every concession is training the client that they can push you further...

[Blurock]

There are accounting packages that allows you to block delivery notes and dispatch if an account is overdue.
However, my advice is still "Cash is King".

Customers pay cash at the supermarket and at the restaurant, so why do you have to give them credit?
You are not a bank. Let them use their credit card or overdraft.

The demanding and granting credit has become a bad habit and is totally unnecessary.
If there are big contracts that needs to be financed there are channels to do that via guarantees, letters of credit etc.

[Bobby Knight]

Yes, you absolutely have to stop that.

You need to have a clear line where you stop supply, and what it will take before supply will be resumed.
And make sure everyone in your business is on the same page and absolutely consistent. Every concession is training the client that they can push you further...

I've now put ALL accounts in 90 days on COD until brought up to date. 7 days into 60 days, I've put our admin assistant onto calling and following up payments. Thank you for the input.

[Bobby Knight]

Yes "Cash is King" however some business' just do so much business with me (I am in the tyre industry) on a daily basis that paying every invoice on the spot, is impossible. MOST of my big customers pay on time, it is the little ones that add up. Taxi operators and transport companies seem to be the biggest culprit. If they experience some kind of a breakdown, that takes priority to get their vehicles running again...

Unfortunately cutting out account business will likely cost me more than half my turnover per month. I envy people who can trade on a cash only business. For now, I believe 'the squeeky wheel gets the oil'

[Bobby Knight]

Sorry guys. I see i said turnover is 1.2M per year. That is actually per month...apologies

[Justloadit]

Unfortunately cutting out account business will likely cost me more than half my turnover per month. I envy people who can trade on a cash only business. For now, I believe 'the squeeky wheel gets the oil'

I have a saying
"I am sorry but I can not afford your business"

Rather have a bird in hand than 2 flying away.
It is up to you to decide exactly how you are going to handle the sale.
When it is a breakdown, is the best time to get your money upfront, as the incentive is there to clear the breakdown. Once the the issue is sorted, there is no incentive to pay any more.

[Dave A]

Sorry guys. I see i said turnover is 1.2M per year. That is actually per month...apologies

A rather significant difference

Great to hear you are taking firm "stop supply" measures. The bad debtors rely on the fear that they will go elsewhere, but frankly my view is "if they are bad debtors that I can't train to pay n reasonable time, let my competition have them".

[Blurock]

A rather significant difference

Great to hear you are taking firm "stop supply" measures. The bad debtors rely on the fear that they will go elsewhere, but frankly my view is "if they are bad debtors that I can't train to pay n reasonable time, let my competition have them".

In my experience I have found that the opposition would also kick them out and eventually the bulk of them will come back to buy your superior product and service at your terms.

The same argument goes for pricing. Quality and service has a price. Charge what you are worth, don't try to compete on price.
There will always be someone who will undercut you. If not with cheap low quality imports, maybe even with stolen goods. Rather stick to your guns and build a good reputation.