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Pay on time or your supplier will pay the price
In The State of Late Payments in South Africa report, a shocking statistic is revealed – 91% of small business currently have money outside of their payment terms owed to them. Ivan Radmore, entrepreneur and CEO of BuzzApex, the free-to-access online business management solution, has expressed his concern at a situation that has dire consequences for the local economy. His observations regarding cash flow management for small businesses has raised a red flag for SMMEs.
Radmore says: ‘It is not rocket science that without payments for work completed or products delivered, companies of any size will not survive. The reality for small businesses is even more worrying. Unfortunately, the ‘little guy’ is taken advantage of by customers, either using them as informal lines of credit, or by making the business owner take time out of their core business activities to continuously follow up on payments. Not only is this unfair, it is almost criminal that companies get away with it. The effects of late payment go beyond the purely financial, there is a definite impact on the social and health wellbeing of the business owner, staff, and family.’
The State of Late Payments in South Africa cites that 20% of SME owners say time off from work has been necessary due to illness, and that late payments is one cause of their mental health issues.
“It’s inexcusable for any business who is paid at the point of transaction not to share the income with their suppliers. A complete re-think on how money is managed on a national platform is undeniably required. The conversation around 30-day payments must be heightened. That solution should translate into suppliers being paid at the close of the current month in which the sale occurred. Business survival depends on it,’ says Radmore.
Here are some essential tips from Radmore to ensure you are paid on time:
- Control who you supply
As a small business, it is tempting to take on any client just to make a buck. Be careful with this mentality. Too many small companies lose their businesses by engaging in this practice.
- Don’t be afraid to secure terms of payment ahead of supply
You’re investing in the customer until they pay you and profit is realised. There must be absolute clarity on how the transaction is handled or it may result in loss of profit.
- Keep a tight recon
If your age analysis is showing overdue revenue, every instance should be chased down. Do not leave it until month-end. Bad payers rely on you being embroiled in other issues, giving them more time to default on payment. There are times when it’s more profitable to walk away from a customer because their poor payment behaviour could close your doors for good.
- Don’t feel like they are doing you a favour
You did the marketing, you negotiated the deal, you closed the deal, and you delivered – so why should you feel like they are doing you a favour by paying you as promised? Late payment could be a result of various reasons. However, as a show of good faith debtors should contact you in advance and make suitable payment arrangements.
Late payments cause a ripple effect, not only for the small business who must establish the means to fund their creditors, but on a personal level too. Families are affected, school fees can’t be paid, clothes can’t be bought – the stress this places on the business owner is immense. When a small business is paid on time – all personal bills are settled, the company is able to focus on their core activities, explore expansion, employ more people, pay appropriate tax for the growth of the macroeconomy, and really contribute to the socio-economic well-being of South Africa.
This is a challenge to all business owners to pay their suppliers in line with their agreements – don’t be the problem, be the solution. The faster money moves and the more control each business has in how much it invests and where that investment resides, the healthier an economy will be. The time for SMMEs to seize control of their own, well-deserved profits is now. With the impact of an unprecedented year and a continuing economic downturn ahead, this is a mission all businesses – big and small – must commit to for 2021 and beyond.
- For more insights on taking your business to the next level visit https://buzzapex.com/ or follow BuzzapexSAon Twitter. Contact us on [email protected].
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