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A Fin24 users is struggling to get money from his customers. He writes:
I have a big problem with people paying late or withholding payment altogether.
In my Credit Application's Terms and Conditions I clearly state:
1. Account must be paid in full 30 days from statement date;
2. Interest will be charged on overdue accounts at prime rate plus 5%.
My question, am I allowed to charge interest on overdue accounts even though I'm not a "registered credit provider" (some of my creditors told me I'm not allowed to)?
My company is registered for VAT and registered as a Company according to the Company's Act.
Thank you for your time and advice.
Anton Ressel, a senior consultant at Fetola , responds:
I did a bit of research for you and this is what I discovered: On accounts such as these, the most you can legally charge defaulters is 2% a month. This is because they are what the National Credit Act (NCA) defines as “incidental credit agreements”.
They’re called “incidental” because the interest you are charging becomes due only if the client fails to pay for the goods and services after a certain period of time, usually 30 days.
When interest is charged from the day on which the service is rendered or immediately afterwards, it is not incidental credit but “actual credit”, and only registered credit providers can enter into such agreements with their customers.
So there you have it. You can legally charge up to 2% incidental credit, after 30 days.
If aged debts are a recurring problem, try rather get part-payment upfront, work on a COD basis or a lay-bye system.
Waiting for money due for products or services already rendered is one of the main causes of business failure.
Good luck.
Anton
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