Many SME businesses in country falls due to over excessively debts owed to them by Individuals, companies and government institutions. These problem is predominant not only in PNG but of course all around the world. In this article let's see how we can manage debt at a certain level while still maintaining our customers.
There are many reasins associated to Debt but below are two everyday reasons.
1. Wantok system
Wantoks system in PNG is so rooted that when wantoks ask for dinao, we give them without hesitation. Imagine you own small trade store and your cousin who have been contributing towards your school will come ask you to give him an item at sale on Dinao. You won't hesitate to give ...
2. Debt over exceeds purchasing power
Thinking that you need to retain your customers, we give dinao over exceeding your cashflow to buy stocks again. It reduces your cashflow.
WHAT YOU SHOULD DO
1. Your Relatives are your worst enemies in business.
To be a professional business man, ignore your relatives and treat them as customers only. Remember always that your business is a different entity altogether and compromising it with your business will only make your business becomes a puppet for your relatives. Tell them the truth that you won't give them dinao . It's Simple!
2. Put Credit Facility at 30 % maximum.
You will definitely know the behavior of your everyday customer. That is, if a regular customer comes and ask you you credit, limit his or her credit to 10% of what he or she buys in a week. If he used to buy K100 worth of goods every week then give him ot dinao Woth K30 each week if they come ask along. Do not give them K100 worth Dinao. This will only reduce your cashflow.
3. Learn to say NO
You must know how to say No without compromising your business. Though it might hurt the other party, lessen your businesses liability. If He comes asking for a 6 packs of SP in your store . Give him 2 only. Atleast mantain your customers but a genuine fixture.
4. Do NOT GIVE ON CREDIT BASIS TO GOVERNMENT INSTITUTIONS.
Always remember that all government have allocated funds for projects and work. If they don't make advance payment , do not ever give them on credit facility. They will only dragging your payment for too long and put your small business in jeopardy.
While there are many reasons associated to Debt. Debt is bad for business. Manage your business with less debt . Your casflow for new stock must be at all cost Maintained .
Attend our SME and Financial LITERACY trainings to know more about failures and successes in SME business
Good Luck
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