We’ve all heard about the bad economy and how things are going to get worse before they get better. We’ve all heard about how this is a global recession and how everyone is going to feel the pinch.
The reality of what is happening today is people are losing their jobs. People are feeling the ‘credit crunch’ and feeling a bit squeezed and small businesses are closing down faster than they are starting up.
Part of the problem may very well be related to the ‘credit crunch’, however I suspect that the economy is getting blamed for a lot of bad cash flow management and how we as small business owners actually run our businesses and in some cases how big Corporate Companies and even the Government are the cause of small businesses going under.
Many businesses (especially the large corporate companies) seem to have the idea that they can just pay the smaller SMME if and when they feel like it – the South African Government in particular, is notorious for this.
The whole drive to assist small businesses, by both Government and the Private Sector is more often than not, negated by those self same companies when they don’t pay the SMME on time for the services or products rendered.
I have it on good authority that most of the big Corporate Companies only pay 60 or even 90 days and Government can be as long as 180 days (and that is with the SMME phoning and harassing them on a daily basis).
The National Credit Act (NCA) also doesn’t really protect the SMME from these hungry sharks either! You see as long as there is no additional ‘financial gain’ on the debt that is paid at 30, 60, 90 or 180 days, they are quite happy, and the SMME doesn’t have to become a registered credit provider despite the fact that the SMME’s are clearly giving credit!
Let me explain this in a little more detail – as individuals we are entitled to charge interest at prime plus two percent on outstanding bills. This is called ‘Incidental’ credit as it was not our ‘intention’ to give credit to the client, but rather a consequence of them not paying us on time.
If you however, charge interest on invoices that are paid 60, 90 days plus then you have to register as a credit provider. If you ‘load’ your rates, you will be undercut by someone else, so basically you are skewered either way.
The bottom line then is that big Corporate Companies and Government fund themselves using money that belongs to the SMME. Then they try and make themselves smell sweetly of rose petals by publically donating huge funds to get SMME’s up and running to boost the economy, whilst quietly destroying them by not paying them on time and thereby forcing them to close their doors.
So what is the point of these huge great big giants declaring that X percentage of their suppliers are from the SMME sector and this is how they are assisting the growth of the economy? How are they assisting? Personally I don’t see it and quite frankly this is one of the reasons that I (and thousands of small businesses across the country) would rather not do business with the Corporate or Government world.
In this instance, it really is a case of the “Cure is worse than the disease”.