WINDHOEK, 11 JUL – Bank Windhoek has urged small and medium enterprises to find ways to mitigate the risk of customers not paying for goods and services.
In a statement issued on Tuesday, Mbo Luvindao, Manager at Bank Windhoek’s Emerging Small-to-Medium Enterprises Finance Branch advised SMEs that payment terms for shop owners were as simple as handing over goods as soon as a customer paid for them.
“However, with services and other types of SMEs, there are more complex payment terms,” he said.
Payment terms vary from payment upon receipt of goods within 30, 60, 90 or 120 days.
“The larger the organisation, the longer they usually wait to pay you,” Luvindao said.
He added that such payment systems could cause severe cash flow constraints for SMEs if clients do not pay within an agreed time, as the entrepreneur would not have money to pay their suppliers, rent, salaries and other business expenses.
“This may have far-reaching consequences for the entrepreneur and their business,” Luvindao stated.
He further advised SMEs to create spending plans for larger expenses and monitor their business cash flows regularly in order to predict future cash flow challenges.
He also urged the business owners to enforce payment discipline such as asking for a deposit or partial payment on their products or services; and shortening the period debtors have to pay by offering a small discount.
(NAMPA)
Bank Windhoek urges SMEs to safeguard cash flows
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