The business world is a large, lonely place for many small entrepreneurs. Competition is fierce, access to sufficient capital is difficult and making every Rand count becomes harder and harder. Add to that a culture of non-payment by many small businesses today and the seemingly mercenary attitude of most of the large banks, and it becomes easy to ask the question, “Why did I ever decide to get into my own business?”

Most of us who are entrepreneurs have asked that question from time to time. Even though it’s a struggle, we probably wouldn’t ever trade the hassles for the freedom and the sense of being in charge of our own destiny.

Yet, – it can be very lonely, not having anyone on tap to discuss things with. Owning and managing a small business can be very lonely. Sure, you’re surrounded by people – employees, customers, suppliers – yet its in those quiet moments before a storm; those times when big decisions need to be made; when all seems against you – its then you can feel at your loneliest. (more…)

Extending credit to customers can be very risky, especially these days when job security is a thing of the past. Nowadays, we have a highly mobile working population in South Africa who can be difficult to trace. We also have a New Credit Act which can work against you if you don’t take proper care, AND PLEASE TAKE THIS SERIOUSLY.

If customer expectations or the nature of your business compels you to sell on credit, you need to manage the risk with a great deal of diligence.

• Customers who pay late (or not at all) cost you money by
• reducing your cash flow and
• directing your time towards collections rather than making more sales.

Bad debts, however, are inevitable for most businesses. The level will depend on your industry.

As a guideline for an acceptable maximum you can compare the cost of bad debts with the cost of insuring your book debts.

One of the best ways to manage your credit risk is to ensure that you have the basics right, and that all your employees involved in the sales and collections process know and understand a sound and simple credit policy. Used consistently, a well conceived credit policy helps you avoid the cost and frustration of handling late paying customers.

Here are nine points to consider which will help you create a simple but effective credit policy for your business:

• Decide who you’re going to offer credit to – all customers, for large orders or amounts of Rx or more, those who purchase at least x times per week/month, longstanding customers of x months or more.
• Decide on how you’re going to verify the credit-worthiness of customers. Will it be by ordering a credit report, checking references, or both?
• Fix the maximum amount of credit you will offer, AND STICK TO IT.
• Lay down guidelines for reducing credit limits. It may be reduced if the customer has a poor credit rating, an unreliable payment history, or one or more overdue bills.
• Decide on the credit terms you will offer. It may be deposit with balance due upon delivery, deposit with periodic progress payments, net 30 days or even COD.
• Be clear on the incentives you will offer for early payment. These can take the form of 2,5% discount for payment within 30 days of invoice, higher credit terms for customers who pay bills early, or just sending thank-you notes to customers who pay on time.
• Decide on action to take as a result of late payment by customers. It could include charging a Late Fees of Rx, and/or finance charges of x% (though there are now implications caused by the New Credit Act in this one), reducing credit limits or even a revocation of credit privileges.
• Formulate a clear-cut collection procedure. For example, if bills are over due by:

• 1 day  – we call the customer
• 7 days  – we call the customer
• 14 days  – we call the customer and mail a firm letter requesting payment
• 21 days  – we call the customer
• 28 days  – we mail a collections notice
• 45 days  – we send the account to a collections agency.

• Decide how you’re going to handle cancellations and refunds. It may be that they will be billed in full, billed proportional to work completed, refunds may be granted within x days of purchase, or even a ‘satisfaction guaranteed or money back’ commitment.

It has been my experience that businesses that are struggling to keep afloat tend to chase turnover, almost at any cost, to keep their cash flow ticking over. This is extremely dangerous and can be terminal. Bad paying customers are simply not worth selling on credit to. In fact, no business is better than bad business!

Collecting the debt invariably involves everyone in the business to a greater or lesser degree, and the cost of this can very easily exceed the profit generated by the sale, never mind the loss of opportunity to do good business! If the bad payer really wants your product he will find some way to pay you cash for it, so hold out for that. If he decides to go somewhere else – well, someone else’s loss won’t put your business into liquidation!

If you have to use a Collection Agency, check out its credentials first. A couple of years ago I decided to use an agency that advertised its rates at 15% of amounts collected. I discovered some time later that they had collected the money and had not paid it across to me. I eventually had to hand them over to Attorneys for collection, which really added insult to injury.

No one likes chasing people for money – it seems to be the job no one wants to do.  If you don’t – well, the results are obvious!  If you want peace, prepare for war!

THIS INSIGHT IS ACTUALLY A REPEAT OF ONE I DID SOME SIX YEARS AGO.  I’VE UPDATED IT A BIT, AND I THINK IT’S RELEVANT TO THESE DAYS, AND OUR PROBLEMS WITH CLUTTER!

You will all have heard the question which goes like: “How do you eat an elephant?”, and followed by the answer, “One bite at a time!”?

Everyone usually laughs knowingly, nods sagely and with a huge sigh, carries on doing exactly what they were doing before – struggling through the clutter in their lives! This topic has been coming up quite regularly in conversations I’ve had with a variety of clients. What I’ve started to realise is that it actually defines the paralysis many of us suffer when faced with seemingly insurmountable obstacles, – be they business or personal in nature. It’s probably never been as difficult in business as it is right now.

Just yesterday, one of my clients was expressing his frustration in not being able to do all the things he needed to do to sort his business out, and the thought of it was keeping him awake at night, bringing on panic attacks and generally de-motivating him. He knows what needs to be done, but the thought of all of it was proving too much. (more…)

I am sure you will find the following comments from John Maxwell to be very helpful in these trying times:

“One of the common denominators of successful people is a single-minded focus that allows them to concentrate on first things first. Ralph Waldo Emerson wrote in “The Conduct of Life”, “Concentration is the secret of strength in politics, in war, in trade, in short, in all of human affairs.” While many people squander their physical and mental abilities, successful people learn how to focus, concentrate, and persist.

Yet even those with a clear sense of purpose sometimes lose their focus and their ability to concentrate on priorities.

Why?

I’ve found it is usually the result of too much internal clutter. I’ve identified four types of clutter that I strive to keep out of my life. The benefit is that I’m much better able to concentrate on that which I do best.

Emotional clutter.
This is the relational baggage that can accumulate when we don’t forgive those who have wronged us, when we hold a grudge, or when we carry a chip on our shoulder because of a grievance long past. The price of holding on to emotional clutter is too high. Not only will it steal energy from your focus, but it has serious emotional and spiritual consequences, as well.

Administrative clutter.
Early on I discovered the need for a system to help me deal with multiple projects and multiple deadlines. I have at least 20 things to accomplish in the next three days, and I will be able to get them all done because I have learned to organize so I don’t waste time looking around for things or wondering what comes next. There’s nothing magical about my system. Find one that works for you and do it.

Calendar clutter.
This is simply mastering the basic principle of time management; you must prioritise your work and spend your best effort on that which will yield the most return. Take a few moments to start listing all the things you’ve done in the last 24 hours that gave you no return whatsoever. Why did you do them? Do they need to be done at all, or can someone else better do them for you? I haven’t mowed my lawn in over 30 years. Some people like working in the yard. I don’t. Why would I give a couple of hours a week to something that has no payoff for me when I could give those same hours to concentrate on my priorities?

Trivia clutter.
I always lose at Trivial Pursuit (TM) because I don’t commit to memory anything that I can find quickly in a book or from someone else. It’s not that I have a bad memory – I just don’t see the value in allowing insignificant things to detract me from my focus. Most people try to live in the path of a flood of trivial phone calls, emails, and meetings. I say get rid of the trivia.

With clutter-free living, you’ll find your focus clear and your anxieties diminished. More importantly, you’ll see a level of productivity that you’ve never experienced before. You are set free to concentrate on that which you were created to accomplish.

How many of you out there own small jobbing or contracting businesses? By that, I mean you’re entirely reliant on irregular contract work, and you have to work hard to get it. In other words, you have no guarantees of work in the ensuing weeks or months, unless you quote your brains out; – and even then you may not be successful! Not that any of us are guaranteed work to come, but somehow jobbers – small contractors – are much worse off.

As far as I can see, there is one fundamental problem to running a jobbing business these days – the high fixed costs of employment are becoming almost impossible to control. Let’s take one small contractor as an example:

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In the past two decades or so, we have seen big business downsizing, rightsizing, unbundling and every other kind of ‘ing’ – and with an increase in the use of new technology, in many instances, became net job-shedders. Small business inevitably employs more people, and generally speaking, more people are self-employed around the world than are employed by the ‘big guys’. In spite of this, big business still gets more of the attention and ear of government.

Over the course of the past year, we have seen large companies around the world, being rescued by their respective governments, even though everyone knows that the reason for their problems has been mismanagement on an unparalleled scale. It seems so unfair!

What about the little guys? Who’s going to help them out – especially now? (more…)