How to Handle Bad Debt Greig Whitton Founder, Evergrow Antony Arvan Partner, Maurice Philips Wisenberg
Webinar outline The National Credit Act Pre-legal strategies Legal strategies
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.
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.
The National Credit Act What responsibilities do you have if it does apply? May need to register as a credit provider.
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.
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.
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.
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.
Pre-legal strategies Get the right mindset Youre running a business, not a bank or a collection agency
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
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
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
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
Pre-legal strategies Do the right preparation Create more value to justify more favourable payment terms
Pre-legal strategies Do the right preparation Create more value to justify more favourable payment terms Offer and incentivise alternative payment options
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
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
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
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
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
Legal strategies Insist on personal suretyships Can deter bad debtors Provides leverage in the event of legal action
Legal strategies Issue letters of demand Many debtors will pay up when threatened with legal action Contract a reputable attorney
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
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