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How to Handle Bad Debt. Greig Whitton Founder, Evergrow. Antony Arvan Partner, Maurice Philips Wisenberg. Webinar outline. The National Credit Act Pre-legal strategies Legal strategies. The National Credit Act. When does it apply?

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how to handle bad debt

How to Handle Bad Debt

GreigWhitton

Founder, Evergrow

Antony Arvan

Partner, Maurice Philips Wisenberg

webinar outline
Webinar outline
  • The National Credit Act
  • Pre-legal strategies
  • Legal strategies
the national credit act
The National Credit Act
  • When does it apply?
  • If you defer payments and charge interest and/or fees.
  • If you use discounts to incentivise prepayments.
the national credit act1
The National Credit Act
  • When 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 act2
The National Credit Act
  • What responsibilities do you have if it does apply?
  • May need to register as a credit provider.
the national credit act3
The National Credit Act
  • What 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 act4
The National Credit Act
  • What 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 act5
The National Credit Act
  • What 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 act6
The National Credit Act
  • What 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 strategies
Pre-legal strategies
  • Get the right mindset
  • You’re running a business, not a bank or a collection agency
pre legal strategies1
Pre-legal strategies
  • Get the right mindset
  • You’re running a business, not a bank or a collection agency
  • Credit is a privilege, not a right
pre legal strategies2
Pre-legal strategies
  • Get the right mindset
  • You’re running a business, not a bank or a collection agency
  • Credit is a privilege, not a right
  • Customers aren’t automatically entitled to a credit account, they need to earn it
pre legal strategies3
Pre-legal strategies
  • Get the right mindset
  • You’re running a business, not a bank or a collection agency
  • Credit is a privilege, not a right
  • Customers aren’t automatically entitled to a credit account, they need to earn it
  • Someone who owes you money is a debtor, not a customer
pre legal strategies4
Pre-legal strategies
  • Get the right mindset
  • You’re running a business, not a bank or a collection agency
  • Credit is a privilege, not a right
  • Customers aren’t automatically entitled to a credit account, they need to earn it
  • Someone who owes you money is a debtor, not a customer
  • Making money trumps making sales
pre legal strategies5
Pre-legal strategies
  • Do the right preparation
  • Create more value to justify more favourable payment terms
pre legal strategies6
Pre-legal strategies
  • Do the right preparation
  • Create more value to justify more favourable payment terms
  • Offer and incentivise alternative payment options
pre legal strategies7
Pre-legal strategies
  • Do the right preparation
  • Create more value to justify more favourable payment terms
  • Offer and incentivise alternative payment options
  • Prepare a robust credit policy
pre legal strategies8
Pre-legal strategies
  • Do the right preparation
  • Create more value to justify more favourable payment terms
  • Offer and incentivise alternative payment options
  • Prepare a robust credit policy
  • Escalate qualifying criteria for larger credit accounts
pre legal strategies9
Pre-legal strategies
  • Do the right preparation
  • Create more value to justify more favourable payment terms
  • Offer and incentivise alternative payment options
  • Prepare a robust credit policy
  • Escalate qualifying criteria for larger credit accounts
  • Complete thorough credit worthiness assessments
pre legal strategies10
Pre-legal strategies
  • Do the right preparation
  • Create more value to justify more favourable payment terms
  • Offer and incentivise alternative payment options
  • Prepare a robust credit policy
  • Escalate qualifying criteria for larger credit accounts
  • Complete thorough credit worthiness assessments
  • Monitor debtors vigilantly for signs of financial distress
legal strategies
Legal strategies
  • Document credit agreements thoroughly
  • Reduce the risk of defaults and disagreements
  • May be mandatory should the NCA apply
  • Provides leverage in the event of legal action
legal strategies1
Legal strategies
  • Insist on personal suretyships
  • Can deter bad debtors
  • Provides leverage in the event of legal action
legal strategies2
Legal strategies
  • Issue letters of demand
  • Many debtors will pay up when threatened with legal action
  • Contract a reputable attorney
legal strategies3
Legal strategies
  • Take legal action when:
  • The debt is over R5,000
  • Your debtor is unlikely to dig in their heels
  • Your debtor can actually pay what they owe
need more help
Need more help?
  • Evergrow forums
  • Guides
  • Greig: 021 671 8225
  • Antony: 021 419 7115