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Cash Flow

Avoiding Bad-Debt Clients

Doing credit checks on clients to ensure that they can pay for the products and services you offer.

Andre Sturmer




How do you ensure new clients can pay for the services and products you offer?

Borrowing and paying debts or using credit is standard practice for any business. Some businesses have good payment records, whilst others don’t, so it’s important to always check the credit rating of any business before lending them funds or dealing with them.

Similar to an individual, a company can have its own credit rating. A credit rating is a number generated by a mathematical algorithm based on statistical analysis of information researched for a credit report. Here’s how to go about building a credit report that will save you from collection problems in the future.

What to include in the credit check

If the report is for the purpose of extending credit then the following items would be important to include. However, the extent of your exposure would dictate the amount of information required and some credit bureaus allow their clients to choose the information they wish to include.

  • Comprehensive company details are important to understand the type of entity you are dealing with. This could affect how you deal with the company and its information, especially considering sole proprietors and small companies fall under the protection of the National Credit Act. It can also affect litigation in the future.
  • Comprehensive details of owners/directors/members to obtain details of current and previous business interests and any judgments.  If a person has been involved in a number of failed companies or has personal judgments you may wish to be more careful in your business dealings with them.
  • Bank code. This verifies that the company’s banking details are legitimate and gives a ‘snapshot’ of the company’s cash flow situation.
  • A few trade references will give you an idea of how quickly the customer is paying its other vendors and whether they are handling credit accounts matching what they are hoping to obtain from you.
  • Details of preferred creditors. If your exposure is high ie. bank overdrafts, mortgage bonds, cession of debtors, and if you are looking for some form of security from the client, this will establish how many suppliers are already ahead of you and also the number of preferred creditors there are in the case of liquidation.
  • If your exposure is high, include further detailed financial information including turnover figures, value of debtors and creditors and audited financial statements.

Should the report be required because you are considering a supply agreement whereby the subject of the report is to become a supplier, the focus of the report would be somewhat different and should include the following in addition to most of the above, as it would be necessary to establish both financial stability and capacity.

  • Operational details, which would include major customers, contracts and agencies.
  •  Details relating to capacity would be important in order to ensure the company was capable of fulfilling your requirements. This would come from type of premises, number of permanent staff, vehicles etc.
  • Financial information, including audited financial statements to ensure stability. This may be hard to come by and depends on the disclosure. It may be easier to use an independent company to request it.
  • Customer references to establish the reliability and operating style of the company.

How to read and interpret a report

Researching a company’s judgments, bank code, financial information and what suppliers have to say in the trade references may seem to be the most important aspects of a credit report.  However, checking on previous or current business interests of the principals, the type of entity or whether the directors have been involved in a previously failed business can often be very telling and a better indicator.

It’s not sufficient to just obtain a credit rating, and by using a professional credit check you will ensure that reports include more information which improves the report’s accuracy in terms of creditworthiness and risk. Using a bureau that is registered with the National Credit Regulator will ensure that the research generated is above board and may well prevent bad business dealings from occurring down the line.

Dealing with cash emergencies

The unexpected can happen to even the busiest businesses. A big customer can be late on payments, or a normally busy season is not so busy. Colleen DeBaise, the author of The Wall Street Journal Complete Small Business Guidebook, shares three ways you can deal with a cash emergency.

Get out there and sell

Jump start your sales efforts to find new customers and work the ones you have. Now’s the time to make sales calls – if you don’t, your competitors will, especially if they learn you’re in trouble.

Review your line of credit

See if there’s any room to borrow. If there’s not, talk to your banker and see if you can increase your ceiling. They might give you the money you need to cover the deficit.

Ask your suppliers for a favour

Remember, you’re a customer too. Talk to the people who provide your supplies and your equipment. See if they can extend your terms or give you a line of credit. After all, they don’t want to lose your business. Now is the time to work those relationships.

Financially-Organised-Cash Flow-Financial Management

André Stürmer, CEO of Inoxico, a registered credit bureau providing business intelligence solutions based on specialised commercial credit information.


Cash Flow

Entrepreneurial Balancing Acts with Debt

Young South African entrepreneurs face many challenges when it comes to debt-related financing. Small and medium enterprise (SME) owners typically require extensive debt financing from bank and non-bank lenders.

Harald Merckel




Young South African entrepreneurs face many challenges when it comes to debt-related financing. Small and medium enterprise (SME) owners typically require extensive debt financing from bank and non-bank lenders. Unfortunately, many South African entrepreneurs are limited in their ability to access capital markets. Among others, the major challenges facing entrepreneurs include lack of credit history, no collateral, shaky credentials, and unformulated business plans.

Regardless, SA entrepreneurs are forging ahead and using multiple resources at their disposal such as payday loan providers, non-bank lenders, family and friends, crowdfunding and other economic empowerment initiatives to raise the necessary seed capital for investment purposes. Given the staggering unemployment rate in the country (+25%), the only way out for many people appears to be entrepreneurship. The 2008 global financial crisis threw the economy for a loop, and now the hopes and dreams of many South Africans hang in the balance.

Related: Every Tough Choice Has Management Debt – Are You Accounting For Yours?

ISM Study Sheds Light on SA Entrepreneurial Pros and Cons

An intensive study conducted by the University of Cape Town’s Unilever Institute of Strategic Marketing (ISM) found that the country is experiencing ‘a crisis of aspiration’. Simply put, many South Africans are struggling to attain their career objectives in an economy that has been ravaged by corruption, mismanagement, and scandal. Despite tough economic times, South African entrepreneurs are determined to try their luck. Pressing challenges in the form of rising unemployment, and an economy mired in failure are challenging entrepreneurs to be more inventive than ever before. The most volatile component of the economic spectrum in South Africa is the middle class.

Many South African families have lived the high life, or ascended the rungs and then been knocked down a peg. This instability is creating added volatility in a country where high crime, mismanagement and political rancour pepper the scene. For many entrepreneurs, any access to credit is a godsend. Banks and non-bank providers offering personal loans, business loans, or credit card funds invariably expose themselves to debt default. For entrepreneurs, it’s important to know where to draw the line. Access to lines of credit in a crippled economy is significantly more valuable than the equivalent access in a developed economy.

How to Know when you are Overstretched as an Entrepreneur

Debt is considered a prerequisite for investment purposes. Most South Africans simply don’t have the necessary capital to start up a high-tech venture, fund a new business, or conduct marketing and advertising activity. As such, lines of credit are increasingly being used to propel business activity among SMEs – both in the formal and the informal sector. However, once debt reaches untenable levels, the tough questions need to be asked. For example, if multiple loans and multiple payments are required monthly, revenue streams need to be evaluated against expenses to gauge whether this is a feasible status quo.

Related: How To Handle Your Post-Holiday Debt

Many entrepreneurs find it difficult to manage multiple loans simultaneously, although it is necessary to acquire the capital from multiple sources. One of the ways to deal with these types of exigencies is a single loan from a low-cost lender in the form of debt consolidation loans. Simply put, these loans are provided by bank or non-bank lenders at lower interest rates than the prevailing interest rate on other lines of credit. By taking out a debt consolidation loan, the entrepreneur has more disposable income over time by not paying the higher interest on credit card debt.

Escape Debt Before Debt Consumes You

There are several other ways to know when your personal financial situation has reached critical mass. For starters, the nature of your business may require you to continue dipping into lines of credit to maintain business operations. If you don’t have the requisite discipline to stop indebting yourself, you may not be able to get out of debt. Debt consolidation is only effective insofar as you have the necessary discipline to put an end to debt financing of all business-related activity.

Credit should be used sparingly, and profits should be generated to allow your business to prosper. In a tight economic climate, costs are the bugbear that need to be attacked. Lavish trappings are unnecessary for business functionality – modest budgets, and high-quality goods and services are far more effective than window dressing at a premium.

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Cash Flow

How South Africa’s Small Businesses Plan To Invest Their Money In 2018

Here are their five areas they should focus their attention on in the next year and beyond.




Despite economic uncertainty, South Africa’s small businesses are positive about the future. In fact, our State of South African Small Business report reveals that 40% of small businesses are expecting to grow. However, to achieve growth without overextending their limited resources, small businesses need to invest wisely.

Here are their five areas they should focus their attention on in the next year and beyond.


When times are tight, companies typically reduce their marketing spend. This isn’t the case for 36% of South Africa’s small businesses. These respondents recognise marketing as a critical investment area.

They’d rather make a concerted effort to grow their customer base, than sit still and do nothing as consumer demand declines.

Related: What To Consider When Investing Your (Hard-Earned) Money


Without access to the latest technology, business growth can quickly stagnate. This is why 23% of South Africa’s small businesses plan to invest in up to date equipment, whether that be new machinery, mobile devices or computers.

The right investment in this area can give a business a real competitive advantage.

It can help boost profits and improve operational efficiency – both of which can help a small business withstand difficult economic conditions with greater success.

Product development

Consumers are spoiled for choice. Their needs are constantly changing and companies can’t afford to become complacent. To keep up with market demands, 22% of small businesses plan to invest in product development. Barring a few timeless classics, most products need a regular review and tweak to stay relevant and popular.



Digitisation is transforming business functions across the board. Technologies, like cloud software can take care of laborious administrative work.

Related: How To Make Money Investing, According To Ashton Kutcher

This liberates employees from time-consuming tasks, enabling them to focus on more strategic work like customer retention and acquisition.

Technology has the power to improve productivity and efficiency. Which is why 18% of small businesses are going to focus their investment plans on this area of their businesses.

Customer service

The customer should always be the priority. It doesn’t matter how good a product is, if there are no customers, then there’s no business. As competition increases, the user experience becomes more and more important to win over customers.

Business growth depends on happy customers and to achieve that, 18% of small businesses plan to invest in delivering better service.

All five of the above business areas are worthy investment focuses. The question is, how does a small business work out what to invest where? The only way it can invest effectively is with a full view of its company finances. A small business needs to be able to see which functions have provided the best return on investment to date.

Related: 12 Millionaire Habits To Start Making Serious Money Soon And Build Wealth In A Hurry

It also needs to consider how much investment capital it has to spend. What’s more, before it makes an investment in say, marketing or product development, it must know exactly how and where the money needs to go.

The right software can help a small business access the real-time insights it needs to make better, faster financial decisions. To combat increased competition and market uncertainty, South Africa’s small business owners need access to up-to-the minute information from any device no matter where they are. An informed investment has the greatest chance of success.

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Cash Flow

The Simple Way To Pay Wages When Your Staff Don’t Have Bank Accounts

If you have employed casual workers over the busy season, you can pay wages even if they do not have bank accounts.






At Absa Business Banking, the things that are important to you are just as important to us. We understand your business needs, which is why we have developed tailored solutions to help you where it counts. Take CashSend Plus, for example. It is a payment solution that enables you to pay workers even if they do not have bank accounts.

Related: Hiring Your First Employee? 5 Things You Need To Know

It is safe and secure

Your employee will receive a six-digit access code and a ten-digit reference number, so that they can verify the transaction. The money is instantly available at an Absa ATM.

You can even pay yourself

We have all lost bank cards or wallets at some point in our lives. What an inconvenience. Well, it is good to know then that you can access cash by sending it to yourself. Now, that is what we call better. 

Related: How Salary Transparency Empowers Employees – And When Not To Use It


Please speak to one of our consultants or call 0860 111 123 or visit your nearest branch.

Absa Business Banking 

Do better business. Prosper.

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