Personal finance: Debt and the entrepreneur

This is a situation that is harshly dealt with because the real factors of why the business individual or entrepreneur could not meet their payments, is never acknowledged by creditors, rather largely viewed as self-inflicted and unacceptable, which many times is not the true situation.

Firstly if any business individual or entrepreneur has secured credit facilities specifically with banking institutions then it indicates that at some stage the individual was absolutely credit-worthy because credit has largely only been afforded to salaried employees.

This means that the business individuals had to have a good financial statement with their existing bank, including financial audited statements.

What went wrong?

Many reasons one of which is the obvious where there is no sustainable business being generated; another could be too many financial commitments but the one that is most ignored is the fact that business owners sometimes have to wait 60, 90 or 120 days for their payments and if this is a small business, then the effect is disastrous.

With no income for all this time it means that they are not only able to sustain their business, employees and operational costs, but also their own personal commitments, understanding that the ricochet is more harsh as it also affects the financial situation and well-being of their employees and most importantly, their families.

When I was in this situation I could almost knock my head against the wall from frustration being sent backwards and forwards by debtors, where excuses like ‘the signatory is ill, or he is travelling; or we are also awaiting our debtors so soon as we are paid, you will be paid’. Then not taking telephone calls to respond to pending overdue payments and the list continues… People, business owners suffer when they do not receive their payments on time and it places them in a dire situation not being able to meet their commitments.

It is easy for calling creditors to disbelieve their situation but the fact is the situation is very common with very little understanding from creditors. Yes, let me assure you business owners do not meet their bill commitments for this reason most of the time, unbeknown to their debtors, who are salaried employees working in organisations, who receive their salaries on time, like clockwork, so they have absolutely no regard to support their debtors.

The other day I had a client in this situation and I requested the client to call their debtors senior manager to ask how he would like it if he never received his salary for 3months? The debtor was stunned as it had not dawned on him that his vendor’s situation could decline if he did not ensure the payment was effected on time.

The question I ask is, where is the logic and support for people in business? This disrupts the cycle and I have known people in business overseas who had to apply for bankruptcy due to not receiving outstanding debtor payments for over one year.

This is a serious issue, an issue that must be reviewed by executive management, where reports must be reviewed monthly to ensure that their vendors are not just put on hold for no reason and that too, for months, without any regard for their situations and in fact it is unacceptable.

•       Why should vendors have to beg and plead with their creditors for being late with their payments simply because a client placed them in this position?

•       Why should their business or home utilities and communication be disconnected for the same reason, when they met the requirements of the assignment and rendered the service which you approve?

•       Why should they be subjected to living frugally when they deserve to be paid the money they worked for?

•       Why should they suffer a lack of sustenance, spending quality time with their families on outings that they now cannot afford due to your slackness of their debtor?

•       Why should they accept all your excuses and the dreaded delays on your part to finally pay them the money due to them?

It is their right, not a consideration and people in jobs, who are assigned to these tasks should learn to take responsibility to meet their commitments on time, without fail.

A few days late is never a problem but a few months, can clean someone out and if an employee or manager assigned to this job cannot live without their salary for a few months, then shall I request that you place yourself in the shoes of your debtor and tell me how you would feel? Is it fair? Absolutely not!

Business owners operate in line with their budgets, income and expenditure like everyone else, except they do not have the luxury of receiving their salary like every other employer and yes, it is a choice, but no, if they are doing good work, delivering on time then they deserved to be paid. They definitely do not deserve to be subjected to humiliation, degradation, loss and all the bad situations they find themselves in when they are faced with this situation.

It does not matter what your processes are, they cannot be delayed by any number of months, because as there is a cycle and a code of ethics that must be followed to ensure you do your job well, and not incur suffering upon others.

Ignorance in this arena is rife amongst employees who so often promise ‘oh the cheque payment will be signed tomorrow’ and another day passes for the business owner and come tomorrow, they are off for the rest of the week without having the common courtesy to inform their creditors.

With the new credit bureau being launched for sure it will affect business owners financial well-being as their ratings will decline with their cheques bouncing, unable to meet their financial obligations which places them in a precarious situation and actually you as their creditor, is also tarnishing this very key reputation because with repeatance of this situation, they will never be able to apply for business credit, even if it was available as their financial statements will be abysmal.

[Note 1:  Theda Muller is a UAE-based author of two books: Embrace Financial Freedom Volume One: 10 Proven Ways To Release Debt And Emotional Fears In Today’s Economy, and Volume Two: Releasing Fear And Bouncing Back From A Debt Crisis.]

[Note 2: The views expressed are the author’s own and do not reflect in any way, the views of Emirates 24|7. Readers are advised to carry out their own due diligence before taking any decision.]
 

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