• About Us
  • Write for Us
  • Paid Content Solutions
  • Contact Us
ExpertHub
  • HOME
  • LAUNCH
  • BUSINESS
  • LEADERSHIP
  • MONEY
  • SUCCESS
  • NEWS
    • All
    • Company Posts
    • ExpertHub Today
    Transunion Global Capability Centres Boom

    Global Capability Centres Boom As They Move Up The Value Chain

    Global Tech companies

    Global Tech Companies Are Turning To South Africa For Media And Marketing Expertise

    Innovation Summit

    Innovation Summit 2021 Showcases SA’s Top Tech Entrepreneurs

    Three customer experience strategies you’re missing-23Sep21

    Three Customer Experience Strategies You’re Missing

    Embracing digital 1st world, SMBs confid. to thrive-23Sep21

    Embracing A Digital-First World, SMBs Can Have The Confidence To Thrive

    SAB Foundation Calling All Entrepreneurs Tholoana Entps. Prog.

    Applications for SAB Foundation Are Now Open

    Trending Tags

    • About Us
      • Write for Us
      • Paid Content Services
      • Contact Us
    No Result
    View All Result
    • HOME
    • LAUNCH
    • BUSINESS
    • LEADERSHIP
    • MONEY
    • SUCCESS
    • NEWS
      • All
      • Company Posts
      • ExpertHub Today
      Transunion Global Capability Centres Boom

      Global Capability Centres Boom As They Move Up The Value Chain

      Global Tech companies

      Global Tech Companies Are Turning To South Africa For Media And Marketing Expertise

      Innovation Summit

      Innovation Summit 2021 Showcases SA’s Top Tech Entrepreneurs

      Three customer experience strategies you’re missing-23Sep21

      Three Customer Experience Strategies You’re Missing

      Embracing digital 1st world, SMBs confid. to thrive-23Sep21

      Embracing A Digital-First World, SMBs Can Have The Confidence To Thrive

      SAB Foundation Calling All Entrepreneurs Tholoana Entps. Prog.

      Applications for SAB Foundation Are Now Open

      Trending Tags

      • About Us
        • Write for Us
        • Paid Content Services
        • Contact Us
      No Result
      View All Result
      ExpertHub
      No Result
      View All Result
      Home BUSINESS Financial Management Cash Flow

      Informed Credit Decisions: Tools For Surviving

      Eamonn Ryan by Eamonn Ryan
      Oct 26, 2009
      in Cash Flow
      10
      Informed Credit Decisions: Tools For Surviving
      Share on FacebookShare on TwitterShare on LinkedIn

      RelatedTopics

      Automated Retail Cash Management Saves Time And Money

      Financial Literacy Key To Business Success – Especially In A Tough Economy

      Trade Agreement Tips That Will Save You Costs

      Any successful businessman knows that it is possible to go against the trend and grow your business while others are contracting – the trick is to do so without taking on more risk than you might otherwise be comfortable with.

      Ivor Jones, Kredit Inform managing director, has for some time been advising clients that the way to flourish during the current consumer slowdown, is to be highly selective in who you give credit to.

      “After many years of incredible credit growth, most South African businesses at this stage are generally still good payers. But we are at the top of the interest rate cycle, and with last year’s introduction of the National Credit Act, through no fault of their own, many payers now find themselves in a tight spot.

      “Considering there is a three to four month lag before the full impact of an interest rate hike is fully felt, it’s going to get worse during the first quarter of this year before it gets better, maybe in the second half,” explains Jones.

      Increase Sales, Not Risk

      Jones recommends a way of increasing sales – without increasing risk. “Don’t necessarily look only to sell to new customers, but sweat your existing book. Only increase sales to those that pay within the stipulated time, and try to decrease sales to those that don’t, while stopping sales to those whose terms of payment are actively deteriorating beyond their limit,” he says.

      So far, this sounds obvious, and Jones admits it. However, from working daily with clients in exactly this position, he says few companies have the data at hand to analyse their book.

      Avoid Companies in Survival Mode

      If a client used to pay in 30 days and extends it to 50 days, can you afford to carry the cost of stock for an additional 20 days? This is especially risky when trying to grow market share – the cash flow implications have driven many a small business into insolvency.

      “We’re mostly concerned with companies that are only just surviving. Unless the business-owner is aware that in the current environment his customers will probably pay more slowly, it may be enough to drive his business over the edge. To survive, he needs to start increasing his book to those customers in a better position to pay and curtail sales to those companies that will not – or cannot – pay on due date, or which have a chance of liquidation.

      “Increasing sales to good payers may be by incentive, or rewarding prompt payment, as long as the cost is not greater than the cost of capital. It’s essential this be done without prejudicing your profitability or even survival. So be selective,” adds Jones.

      KreditInform offers a wide range of services that assist companies to avoid risk. It performs risk profiling of the entire book of a client, comparing those businesses against its extensive database of payments in South Africa.

      The cost of the service – inexpensive, claims Jones – is certainly relatively cheap compared to the risk of bad debt.

      “We attribute a credit score to every company on a client’s book, as well as provide a history of their total payment record. Each is significant. A company may have a poor payment history, but for strategic reasons has maintained a good track record with yourself. You may therefore be the last to know when it’s in trouble. You therefore need to know its total payment history.”

      Then there is the problem that small business has in supplying Government. “A company may have a great credit score, but never pays on time. If you still wish to do business with it, you must know you’ll be carrying your stock for longer and budget accordingly. More importantly, you need to build that cost into your margin. You cannot take that degree of risk on a tight margin,” says Jones.

      All a client has to do is hand over its ledger to the credit agency, which interrogates it, ensuring you are dealing with the correct legal entity, providing you with the credit rating and monitoring any change in payment patterns on a quarterly or monthly basis. A particularly risky customer or the entire book can also be insured.

      Opt For a Total Credit Solution

      “We provide a total solution, which includes consultation on your credit procedures and the installation of our credit software. This software sits on top of your accounting package and monitors the payment trends of all debtors.

      “This not only tracks each client’s performance with you, but offers a risk profiling tool before offering credit terms to a new client. It tells you when to stop supplying a non-performing debtor until he gets back into line. It also sets authority limits, such as placing the onus of responsibility for bad debts on whoever authorised the credit line.

      “From our extensive experience, we have conclusively proven that companies that have the discipline to stick to their credit policies do not get in trouble during times like these – its only those companies that lack self-discipline that do,” concludes Jones.

      Eamonn Ryan

      Eamonn Ryan

      Before becoming a financial writer and freelance journalist in 1997, Eamonn Ryan was a legal adviser, company secretary and alternate director at listed company Cashbuild Limited from 1988 to 1997. Since becoming a financial writer, he has focused on the business and financial sectors, as well as personal finance, writing for Finweek, The Star Business Report, Sunday Times Business Times, Business Day, Mail & Guardian, Entrepreneur, Corporate Research Foundation (which brings out a series of books each year ranking SA’s best employers and best managers), as well as a host of once-off and annual publications such as ‘Enterprising Women’ and ‘Portfolio of Black Business’. He also writes media releases, inhouse magazines and sustainability or annual financial reports for various South African corporates and financial services groups, including the Ernst & Young annual M&A book.

      Quick Links

      • Business Plan Advice
      • Business Plan Format Guide
      • Business Plan Format
      • Sample Business Plans

      NEWSLETTER SIGN-UP

      Sign-up for Weekly ExpertHub Updates

      * indicates required




      EXPERT INSIGHTS

      Mo Rafi - 4 Banking Secrets

      4 Banking Secrets That Most People Don’t Know About

      by Mo Rafi

      Mo Rafi founded Rafi Credit Consulting Inc, a private consulting firm based in Toronto, Canada.

      RevenuePartners Time Management for Sales Teams

      Advice from RevenuePartners to hack sales team productivity

      by Andrew Honey

      Time management is one of the costliest challenges in business today. Here are 6 hacks from RevenuePartners to help you...

      Top Reasons Why You Should Study Business Administration

      Top Reasons Why You Should Study Business Administration

      by Adrian Lomezzo

      Administration course, these reasons should help you make the right choice

      Effective Video Strategies For Your Online Store

      Effective Video Strategies For Your Online Store

      by Frank Hamilton

      Video marketing is an incredibly powerful digital marketing technique. Here’s how you can use it for e-commerce to promote your...

      • HOME
      • LAUNCH
      • BUSINESS
      • LEADERSHIP
      • MONEY
      • SUCCESS
      • NEWS
      • About Us
        • Write for Us
        • Paid Content Services
        • Contact Us
      • About Us
      • Write for Us
      • Paid Content Services
      • Contact Us
      • Terms & Conditions
      • Data Privacy Policy
      • Privacy Policy
      • Sitemap

      Copyright © 2022 ExpertHub.info
      Revenue Growth Experts

      No Result
      View All Result
      • HOME
      • LAUNCH
      • BUSINESS
      • LEADERSHIP
      • MONEY
      • SUCCESS
      • NEWS
      • About Us
        • Write for Us
        • Paid Content Services
        • Contact Us

      Copyright © 2022 ExpertHub.info
      Revenue Growth Experts

      Login to your account below

      Forgotten Password?

      Fill the forms bellow to register

      All fields are required. Log In

      Retrieve your password

      Please enter your username or email address to reset your password.

      Log In