It is well known that many businesses outside of the hospitality industry experience cash-flow problems around this time of the year, and what with Covid and the related restrictions and lockdowns 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. Now, more so than ever, it is imperative for credit controllers and financial directors to keep a close eye on the ball and to manage their debtors’ books carefully and appropriately.
According to the CIPC, the Companies and Intellectual Property Commission, as at 30 October, over 230 business rescue cases had been filed in South Africa since the beginning of the first phase of the country’s lockdown in March 2020. With all sectors affected by the lockdown and with very few businesses able to generate income and keep employees employed, a significant number of retrenchments and business closures across all sectors and industries have resulted. As a result, many South Africans, businesses and service providers find themselves in debt, with little indication of where and how they will repay what they owe, or be repaid what is due.
PJ Velduizen, MD of commercial law firm Gillan and Veldhuizen Inc., says that in these desperate times ‘Covid delinquencies’ are likely to explode and that collections amid the pandemic call for care, consideration and co-operation. When invoices aren’t getting paid, consider these steps 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 by the end of January 2021, the ‘mountain may be too high’ for your debtors, he cautions.