Long Overdues: The No.1 Business Killer

When I walked and talked the talk among the business people in Brunei, they always highlight the biggest obstacle for Brunei business continued growth and survival. The obstacle and the main killer is the long overdue payment.

Besides long overdue payment, I recognised under capitalize, improper management and over estimate during market research are also the business killer in Brunei.

Most businesses that engage on government projects will mostly often go to the business graveyard. The main reason will mostly due to long overdue payments that extends more than 90 days. However, I also found out that some businesses that do not engage with government project were also affected with long overdue payments. Some are attributed to competitors strategic and tactical marketing planning to regain market share.

To top it all, to manage the No.1 business killer (a murderer exempted from trial) is to have a good credit and money management. You can’t blame 100% on government late payments or your clients late payments. What I learned from my painstakingly (hard lesson) in the business world, is to limit your credit line exposure. You may limit credit sales of not more than 30%-40% of the company cash reserves or cash flows.

When I was still at the bank, the management will allow not more than 20% of all its credit portfolios to fall into bad debts or non-performing financing/loans. So why not we all practice what the big guys are doing.

In this way we can limit the late payment risk that will surely affect our business cash flow. Another way, if you planned to start-up a business or planning to offer credit line to your clients (new or existing) is to allocate a certain percentage of funds or capital for credit exposure risk and to have a legal papers in hand. In case of long default (providing the amount of credit default per client is sufficient to cover legal cost) we can bring the matter to the court for settlement.

So, in setting up a credit line or setting up a business plan, please do include your credit planning and risk exposure in place and asked the lawyer to do the job of collecting long overdue payments for your business. Do it professionally.