Times are tough and we put together some advice from a debt collector.
Our economy has taken a serious knock in recent times. It was frail, to begin with, and Eskom with its constant load-shedding was not making that any easier, but along came the oil war and Coronavirus which caused the entire apple cart to tumble.
What should cash strapped companies do in times like these?
From a debt collecting attorney’s perspective, here is some advice.
- Assess the company’s outstanding debtors and ascertain what the outstanding book debt is.
- If the company has not already done so, instruct an attorney to collect on all outstanding debtors.
- Ensure that the debtor policy is in place and being followed rigidly. Remember, not only companies are struggling financially at this point in time, but consumers are also feeling the pinch. If no follow-ups are being made on debtors, they may very likely default!
- When clients request settlement terms of extended payment duration, do not be overly stubborn in granting it, smaller payments monthly are still better than no payment. However, do not extend further credit to clients in dire financial straits.
- Minimize exposure and risk in granting of credit. This may be done by amping up the vetting when onboarding new clients, but also by obtaining deposits from new and existing clients that will at least cover the expenses.
- Especially in these times, do not onboard new clients without insisting on surety. One cannot be certain that any company will be able to survive the current downturn.
- Review credit terms with existing clients, some clients may be on 60 – 90 days credit terms. You may consider revising the terms to shorten the same in order to improve cash flow.
- It is also a wise decision, especially in tough economic times, to revise credit limits. Decrease credit limits where necessary, especially for higher-risk clients.
Making some small policy changes internally could make all the difference in the eventual outcome. Intervention should to two-pronged, solutions to any existing problems, as well as prevention of re-occurrence thereof. Thinking ahead could make all the difference in the world!
If you would like advice on dealing with bad debtors or amping up internal debtor protocols, please give our offices a call.