Profiling Your Ideal Customers

How to Handle Bad DebtGreig WhittonFounder, Evergrow

Antony ArvanPartner, Maurice Philips Wisenberg

Webinar outlineThe National Credit ActPre-legal strategiesLegal strategiesThe National Credit ActWhen does it apply?If you defer payments and charge interest and/or fees.If you use discounts to incentivise prepayments.

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

The National Credit ActWhat 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 ActWhat 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 ActWhat 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 ActWhat 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 strategiesGet the right mindsetYoure running a business, not a bank or a collection agency

Pre-legal strategiesGet the right mindsetYoure running a business, not a bank or a collection agencyCredit is a privilege, not a right

Pre-legal strategiesGet the right mindsetYoure running a business, not a bank or a collection agencyCredit is a privilege, not a rightCustomers arent automatically entitled to a credit account, they need to earn it

Pre-legal strategiesGet the right mindsetYoure running a business, not a bank or a collection agencyCredit is a privilege, not a rightCustomers arent automatically entitled to a credit account, they need to earn itSomeone who owes you money is a debtor, not a customer

Pre-legal strategiesGet the right mindsetYoure running a business, not a bank or a collection agencyCredit is a privilege, not a rightCustomers arent automatically entitled to a credit account, they need to earn itSomeone who owes you money is a debtor, not a customerMaking money trumps making sales

Pre-legal strategiesDo the right preparationCreate more value to justify more favourable payment terms

Pre-legal strategiesDo the right preparationCreate more value to justify more favourable payment termsOffer and incentivise alternative payment options

Pre-legal strategiesDo the right preparationCreate more value to justify more favourable payment termsOffer and incentivise alternative payment optionsPrepare a robust credit policy

Pre-legal strategiesDo the right preparationCreate more value to justify more favourable payment termsOffer and incentivise alternative payment optionsPrepare a robust credit policyEscalate qualifying criteria for larger credit accounts

Pre-legal strategiesDo the right preparationCreate more value to justify more favourable payment termsOffer and incentivise alternative payment optionsPrepare a robust credit policyEscalate qualifying criteria for larger credit accountsComplete thorough credit worthiness assessments

Pre-legal strategiesDo the right preparationCreate more value to justify more favourable payment termsOffer and incentivise alternative payment optionsPrepare a robust credit policyEscalate qualifying criteria for larger credit accountsComplete thorough credit worthiness assessmentsMonitor debtors vigilantly for signs of financial distress

Legal strategiesDocument credit agreements thoroughlyReduce the risk of defaults and disagreementsMay be mandatory should the NCA applyProvides leverage in the event of legal action

Legal strategiesInsist on personal suretyshipsCan deter bad debtorsProvides leverage in the event of legal action

Legal strategiesIssue letters of demandMany debtors will pay up when threatened with legal actionContract a reputable attorney

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

Need more help?Evergrow forumsGuidesGreig: 021 671 8225Antony: 021 419 7115