Don’t get sucked in by non-payment

Small, Medium and Micro-sized Enterprises (SMMEs) are the key to stimulating economic growth, job creation and transformation in South Africa. This is an issue which is high on the national agenda with government indicating that every South African should try and foster an entrepreneurial spirit of enterprise development.

Statistics have shown that most small businesses fail within the first 24 months of their existence if they are not mentored and assisted to overcome the challenges they encounter in the early stages. Various initiatives have therefore been launched to fulfil this guidance role and fast-track the development of SMMEs.

Manage your risk properly

Every intermediary knows that a vital aspect of management of any business is that of risk. Insuring against business risks is certainly not a new concept, and most entrepreneurs will insure their businesses against fire, theft, accident, public liability as well as directors and officer’s liability. Yet, they most likely overlook their biggest asset, which is their debtors.

If a business does not get paid for the goods or services supplied to its customers, it could quite simply go out of business. And being in business is about making money, not losing it.

Credit Guarantee has introduced a new solution to the market that suits SMMEs. It is a trade credit insurance policy that now simplifies the administration of non-payment risk, coupled with an early claims settlement option.

The mechanics of the product

This Small & Medium Enterprise Cover policy is designed for those companies that do not have large back office support and through an online system called CregaLink, can almost entirely be administered electronically.

A premium is charged monthly by debit order so that the company does not need to worry about missing any payments; cover on individual customers is obtained online, and up to 60% of applications are issued immediately. In the event that a customer fails to pay, claims can be lodged online and now most significantly, if their cash flow dictates it, the policyholder can request an early claims settlement from Credit Guarantee of amounts up to R350 000.

The policyholder is covered against the customer failing to pay due to liquidation, Business rescue as well as delayed payment which is not as a result of a trade dispute. There is also no longer a requirement that they obtain judgment prior to a claim being considered.

Collection costs of recovering the debt owed will also be shared between the policyholder and Credit Guarantee. The net result is that the SMME can enjoy cover against non-payment that suits their needs, allowing for growth of existing business and safe possible expansion into new markets.

Questions for intermediaries

The questions for intermediaries to ask of the commercial clients on their books are quite simple:

1. Does the client sell goods or services to other commercial customers (business to business sales)?
2. Do they do so on credit terms (not exceeding 180 days)?
3. Have they experienced any non-payments or had to write off any bad debts in the last 12 to 18 months?

If the answer to any of these questions is yes, there is a strong likelihood that the client could need a Trade Credit Insurance policy.

At Credit Guarantee we appreciate that intermediaries may not have any or enough knowledge of trade credit, so a category called Introductory Broker has been made available. This, as the name implies, only requires that the intermediary refers their client to Credit Guarantee and an accredited representative will accompany them on all acquisition, quotation, acceptance and final policy calls. They will remain appointed on the policy as long as the client maintains that appointment.