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Cash Flow

Fight for Your Due

Apply tough debt collection measures in today’s uncertain economic climate.




Debt Collection

The first and friendliest way of collecting debts once they are handed over to an attorney is for the attorney’s secretary to call the debtor in the hope that may elicit payment. But what happens when it doesn’t?

At this point a summons is issued. The problem is that there are many creative attorneys who will find some technical point to delay payment. This is the time that matters can take to come to court:

Approximately a year to be heard in the Magistrate’s and Regional Court and two to three in the High Court. I have even known of certain instances where companies have closed down in the interim and the debt is written off, or the delaying tactic has worked and the company sued has been liquidated.

Many financial advisors and credit controllers of large and small companies alike have complained to me that they are tired of attorneys rendering accounts for postages, petties and correspondence, while the account remains unpaid and the only entity benefiting is the debtor.

The usual upshot of costs becoming exorbitant is that the debt is written off and the attorney is told to close his file. An already bad debt has just ended up costing more money. The endless costs have quelled the appetite for recovering the debt.

Ivan ‘the Terrible’s’ debt collection techniques

Here are my suggestions for collecting debt over R50 000.

First, I recommend a liquidation of the company/close corporation. A company may be liquidated if it can be shown that it’s unable to pay its debts. I have no doubt that this is the most effective way of
collecting debts over R50 000.

Before a matter is handed over to an attorney, and particularly if this procedure is adopted, the following requirements need to be adhered to:

  • The paperwork is in order (proper proof of delivery, etc)
  • All genuine queries relating to the account have been resolved – there must be no room for the debtor to manoeuvre out of paying the debt
  • Detailed notes have been made of conversations with the credit department of the debtor on why payment is not being made
  • The management of the company believes that the settlement of debt is more important than retaining the customer.

Inability to pay debts

A company is deemed unable to pay its debts if, after receiving a letter of demand demanding payment of the debt, more than 21 days has elapsed since receipt of the letter and the collector has received no response.

A company is also deemed unable to pay its debts if there is a written or oral admission by a representative of the finance credit department of the debtor that the company is unable to pay, because it has cash flow problems.

It’s absolutely imperative to set up a company for liquidation if you receive an admission along the likes of, “We cannot pay our debts because we are awaiting a large payment from an important client,” or “We cannot pay our debt to you because nobody is paying us,” or even, “We cannot pay our debt because business is bad and our directors are trying to obtain finance from a bank or a third party.” These are telltale signs of a long-term inability to pay.

The credit controller should note these responses and confirm in writing to the debtor customer the contents of the telephone call. For example, “I confirm that I telephoned you on 6 October 2012 demanding payment of the sum of R100 000.

During the discussion you advised me you could not pay the debt as you were also owed substantial amounts of money by your customers who were not paying their debt.

I confirm further that there has never been a dispute relating to any of the orders placed but you merely are short of funds.”

An admission is the beginning of a successful liquidation application. Bear in mind that one cannot liquidate a company or a close corporation if there is a genuine dispute about the amount owed. So, for instance, if there is a dispute about short delivery or credit notes not having been passed, or other substantial defences, you cannot liquidate. You then have to issue summons.

If there are no disputes, and you are armed with the debtor’s inability to pay, you can liquidate.

The advantages of a liquidation

  • It’s cost-effective

It can be cost-effective to all parties if one can agree a fee with one’s client so that the attorney does not have to render countless accounts and leave the client in limbo.  Invariably, one can collect the costs from the debtor, or most of the costs, because the debtor is too terrified not to pay under the sword of threatened liquidation.

  • Timing is crucial

In today’s recessionary climate, first come is first served. Those companies that continually phone for the money without following a legal route often end up having to complete long-winded claim forms when the company has been placed into liquidation and receiving a meagre dividend of one cent in the rand years later.

  • The shock effect of a liquidation application

If you follow this route you have to balance the fact that you might not do business with that customer again with the likelihood that you will get paid. However, I have found from experience that companies served with liquidation applications tend to find the money to pay, as it’s costly to oppose the application and file affidavits when there is no defence.

In a liquidation application the technical defences referred to when one issues summons are minimised. The result is that you are normally paid quickly as opposed to waiting years for payment. Ultimately, the prospect of the business being closed down, which is the effect of a liquidation order, outweighs all other considerations.

  • The restructuring of securities

Sureties that are out of date (ie. where there are new directors) can be re-signed, or, if there are no sureties, these can be obtained if the company wishes to make payment of the debt in instalments.

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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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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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