Slow payers and small business

[Isetech]

We talking small business. When you are a CC or PTY, that's a different ball game.

I have been on a mission to become debt free, by this I mean no overdraft and no credit card limit, why would I do such a silly thing when I run a business?

There are a few people out there who can manage debt but I am not one of the many who cant.

Throw in a few slow payers and you will spend the rest of your life paying interest and fees.

A lesson I have learnt and will be doing going forward, I would rather take a loan and pay off a set amount knowing that in a set period of time it will be paid off, rather than paying interest and fees on a life long debt that just never goes away (unless you can mange your finances).

What people dont realise when they dont pay a small business on time, the chain reaction it causes.

I am in this position right now, I have a slow payer who is slowly becoming a bad debt. It is affects my service to my good customer who pay. I did get a deposit and now waiting for final payment, which is still a lot of money.

It is not fair on the good customers, because they pay on time and some even pay in full before I start the job. Because of the slow paying customer I get behind on other stuff like equipment maintenance, so now a machine and the vehicle cant be serviced because I dont have the funds.

I dont just work for anyone, I only work for people I trust, you have to be referred by a friend or one of my existing customers, however ever now and again one of these people slip in and screw up the whole process.

I dont need slow payers and would much rather build stuff in my workshop, rather than go out to site and do work for a slow payer. If you become a slow payer you generally get a star next to your name and when I see the number, I dont bother answering the phone.

You can do all the business training and courses, even get a business couch and all that stuff, but at the end of the day, slow payers and bad debt will destroy your business.

[Andrew_van_Zyl]

Cash flow is crucial. I've been lucky so far - only had one slow-ish payer.
I have a Golden Rule - I ask for 60% deposit up front and make sure the client knows I don't leave site without full payment. With cellphone banking, EFT and other there is no excuse.
I don't want to get into a situation where I can't afford petrol or pay for my cellphone.

[Blurock]

I totally agree. Cash flow is the most important fuel of the business.
I have been burnt before and have lost a lot of money due to bad debts. Our legal system is so broken that litigation often means throwing good money after bad.
I have learnt not to chase sales and would rather do without a risky sale. I don't do business with government and I do not allow any credit facility. I can now sleep at night and concentrate on giving my customers the best service.

I have empathy with guys in the service industry such as sparkies and plumbers. You need the business and do get a deposit, but you never know if the guy will pay you once the job is done.

[Derlyn]

@Blurock

100%, my brother.

Another word of advice for the newbies ...... although a good source of work, if at all possible, steer well clear of estate agents and conveyencers and the business of COC issuing for property transfers.

Leave it to the big boys, unless you deal directly with the seller on a cash basis, which is usually not the norm.

No1. You don't know when you gonna be paid.

No2. You don't know if you gonna be paid.

No3. Giving the attorney whose doing the transfer, credit, is illegal, unless you are a registered credit provider.

Should the deal fall through and go sour, the same attorney who accepted credit from you, without batting an eyelid, will tell you that you should not have provided credit as you are not registered to do so.

They are snakes.

It does not help making R1000 per job on 4 jobs and then lose R4000 on the fifth job. You have then done 5 jobs for free.

Use it, don't use it. Been there, done that.

Good advice there, Blurock.

[Dave A]

No3. Giving the attorney whose doing the transfer, credit, is illegal, unless you are a registered credit provider.

Should the deal fall through and go sour, the same attorney who accepted credit from you, without batting an eyelid, will tell you that you should not have provided credit as you are not registered to do so.

They are snakes.

And that attorney was selling you snake oil - probably in an attempt to save their own skin. The National Credit Act is nowhere near that "simple".

True enough though that you need to take adequate measures upfront, have adequate capital to cover what you are financing, and know that you are going to lose some money on deals that have gone sour every now and then. Essentially, you need to ask some hard questions, get written undertakings and price in the risk before you grant terms of "payment out of proceeds of transfer".

[Firepool]

@Blurock

100%, my brother.

Another word of advice for the newbies ...... although a good source of work, if at all possible, steer well clear of estate agents and conveyencers and the business of COC issuing for property transfers.

Leave it to the big boys, unless you deal directly with the seller on a cash basis, which is usually not the norm.

No1. You don't know when you gonna be paid.

No2. You don't know if you gonna be paid.

No3. Giving the attorney whose doing the transfer, credit, is illegal, unless you are a registered credit provider.

Should the deal fall through and go sour, the same attorney who accepted credit from you, without batting an eyelid, will tell you that you should not have provided credit as you are not registered to do so.

They are snakes.

It does not help making R1000 per job on 4 jobs and then lose R4000 on the fifth job. You have then done 5 jobs for free.

Use it, don't use it. Been there, done that.

Good advice there, Blurock.

The company I work for has 3 divisions , maintenance , compliance and construction and big jobs on all three divisions . Loose most on maintenance but can handle lots of little bad debts as some people will just not pay . construction takes too long and low margins and eats cash flow . Compliance is very negative aspect but lots of work around

You can get paid on transfer by the attorney and get it in writing . The money is more guaranteed from coc work than construction . The problem with the coc work is just the general lack of understanding of most stakeholders which is bad for your reputation even when you trying to do the right thing . Too many know it all house wives .
Never had issue with lawyers but estate agents are hard work and can be very fickle with no loyalty .

Not saying your above is wrong by other people as good to have different views as well all deal with Same issues and find the posts by Dave and derlyn very insightful on this forum.