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How to Handle Bad Debt Greig Whitton Founder, Evergrow Antony Arvan Partner, Maurice Philips Wisenberg.

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Presentation on theme: "How to Handle Bad Debt Greig Whitton Founder, Evergrow Antony Arvan Partner, Maurice Philips Wisenberg."— Presentation transcript:

1 How to Handle Bad Debt Greig Whitton Founder, Evergrow Antony Arvan Partner, Maurice Philips Wisenberg

2 Webinar outline The National Credit Act Pre-legal strategies Legal strategies

3 The National Credit Act When does it apply? If you defer payments and charge interest and/or fees. If you use discounts to incentivise prepayments.

4 The National Credit Act When does it not apply? Shareholder loans. Informal loans between family members and friends. Transactions between stokvel members. Supplying state bodies. Supplying juristic persons with an asset value or annual turnover exceeding R1m. Credit agreements over R250,000 involving juristic persons.

5 The National Credit Act What responsibilities do you have if it does apply? May need to register as a credit provider.

6 The National Credit Act What responsibilities do you have if it does apply? May need to register as a credit provider. Must assess ability of customers to settle debt and not extend credit recklessly.

7 The National Credit Act What responsibilities do you have if it does apply? May need to register as a credit provider. Must assess ability of customers to settle debt and not extend credit recklessly. Must not exceed permissible fees and interest rates.

8 The National Credit Act What responsibilities do you have if it does apply? May need to register as a credit provider. Must assess ability of customers to settle debt and not extend credit recklessly. Must not exceed permissible fees and interest rates. Must ensure that all credit agreements comply with the Act.

9 The National Credit Act What responsibilities do you have if it does apply? May need to register as a credit provider. Must assess ability of customers to settle debt and not extend credit recklessly. Must not exceed permissible fees and interest rates. Must ensure that all credit agreements comply with the Act. Must maintain a record of all credit transactions.

10 Pre-legal strategies Get the right mindset Youre running a business, not a bank or a collection agency

11 Pre-legal strategies Get the right mindset Youre running a business, not a bank or a collection agency Credit is a privilege, not a right

12 Pre-legal strategies Get the right mindset Youre running a business, not a bank or a collection agency Credit is a privilege, not a right Customers arent automatically entitled to a credit account, they need to earn it

13 Pre-legal strategies Get the right mindset Youre running a business, not a bank or a collection agency Credit is a privilege, not a right Customers arent automatically entitled to a credit account, they need to earn it Someone who owes you money is a debtor, not a customer

14 Pre-legal strategies Get the right mindset Youre running a business, not a bank or a collection agency Credit is a privilege, not a right Customers arent automatically entitled to a credit account, they need to earn it Someone who owes you money is a debtor, not a customer Making money trumps making sales

15 Pre-legal strategies Do the right preparation Create more value to justify more favourable payment terms

16 Pre-legal strategies Do the right preparation Create more value to justify more favourable payment terms Offer and incentivise alternative payment options

17 Pre-legal strategies Do the right preparation Create more value to justify more favourable payment terms Offer and incentivise alternative payment options Prepare a robust credit policy

18 Pre-legal strategies Do the right preparation Create more value to justify more favourable payment terms Offer and incentivise alternative payment options Prepare a robust credit policy Escalate qualifying criteria for larger credit accounts

19 Pre-legal strategies Do the right preparation Create more value to justify more favourable payment terms Offer and incentivise alternative payment options Prepare a robust credit policy Escalate qualifying criteria for larger credit accounts Complete thorough credit worthiness assessments

20 Pre-legal strategies Do the right preparation Create more value to justify more favourable payment terms Offer and incentivise alternative payment options Prepare a robust credit policy Escalate qualifying criteria for larger credit accounts Complete thorough credit worthiness assessments Monitor debtors vigilantly for signs of financial distress

21 Legal strategies Document credit agreements thoroughly Reduce the risk of defaults and disagreements May be mandatory should the NCA apply Provides leverage in the event of legal action

22 Legal strategies Insist on personal suretyships Can deter bad debtors Provides leverage in the event of legal action

23 Legal strategies Issue letters of demand Many debtors will pay up when threatened with legal action Contract a reputable attorney

24 Legal strategies Take legal action when: The debt is over R5,000 Your debtor is unlikely to dig in their heels Your debtor can actually pay what they owe

25 Need more help? Evergrow forums Guides Greig: Antony:


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