How’s that debtors’ book reading?

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Don’t let your defaulting debtors turn you into a defaulting debtor…

With many businesses experiencing cash-flow problems, it may very well be a bleak period for many more industries than usual. The ramifications of COVID-19 on any part of the business environment can cause your customers to suffer cash-flow problems, delay or default on payments, shut down their businesses or file for bankruptcy. Therefore, it is imperative for SME owners, credit controllers and financial directors to keep a close eye on the ball and to manage their debtors’ books carefully and appropriately. ‘Covid delinquencies’ are likely to explode and that collections amid the pandemic call for care, consideration and co-operation.

PJ Velduizen, MD of commercial law firm Gillan and Veldhuizen Inc. advises these steps for when your invoices aren’t getting paid and the steps you can take to recover your debts:

• Be prepared – make sure you know everything there is to know about the customer and what is due;
• Document everything;
• Communicate with debtors. Be non-confrontational, don’t alienate them, avoid manipulation and keep the channels of communication open;
• Negotiate terms. Get payment commitments, even part-payments;
• Be empathetic, but ensure that your outstanding payments are top-of-mind for your debtors and re-cap the agreed terms;
• If you are being ignored or getting the run-around, consider approaching an attorney to take over the collection sooner rather than later.

“It’s a case of first-mover advantage in prioritising your payment in the mind of your debtor, or at least considering how to secure your payment to avoid your defaulting debtor turning you into a defaulting debtor,” Veldhuizen advises. If you don’t act soon, the ‘mountain may be too high’ for your debtors, he cautions.

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