New code promotes strict payment terms

5 Damian Michael 16 200x300 New code promotes strict payment terms

Innovo Networks’ Damian Michael

Small businesses that supply goods or services to those that have joined a new initiative to pay small firms on time, may no longer need to worry about cash-flow concerns.

Initiated by the National Small Business Chamber (NSBC), the Prompt Payment Code aims to get government departments and corporates to pay their small suppliers within the stipulated 30-day invoice period.

In addition, those that sign up to the initiative also agree to provide suppliers with clear guidance on their procurement terms and promote the code among their supply chain.

Cape Town-based Information Technology and Communications company Innovo Networks was one of the first companies to sign-up to the code in April.

Founder Damian Michael says small businesses often risk losing business or having to close their doors when payments are delayed.

It is hoped that the code will ensure a better working relationship between participating businesses and other stakeholders who conform to its conduct.

The code is already supported by big businesses such as Sanlam, Santam and Nedbank, as listed on the initiative’s website.

“I heard about the code through my NSBC membership. As a small business it was fundamental for Innovo Networks to abide by the code and pay suppliers on time. This creates loyalty and shows big companies that small businesses can also implement the code,” says Michael.

NSBC chief executive Mike Anderson, says the association initiated the code after finding that local small businesses were losing business because of non-payment.

“Prompt payment is vital to the cash-flow of every business, and especially to smaller businesses. The Prompt Payment Code is about encouraging and promoting best practice between government, larger organisations and their small suppliers,” points out Anderson.

Michael agrees, adding that a negative cash-flow cripples a business from delivering products or services on time.

It often forces employers to turn to retrenchment and borrowing to cover existing costs, landing them in more debt and ultimately with a bad credit record.

Reasons for late payments do not lie with debtors alone, says Michael. He says entrepreneurs may use these tips:

  •  Negotiate payment terms before a deal is concluded.
  •  Stick to your guns. If a debtor has agreed to a 30-day payment term, hold them to it.
  •  Be fully in control of your debtor book information at all times. Your system of tracking monies should well managed.
  •  Invoice on time and accurately; don’t make sloppy accounting work the reason your debtors don’t pay on time.

Businesses and government institutions can sign up online.

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