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You can't write off clients when their employees go on strike, but might be able to write off the debt they're causing

by , 28 April 2014
When workers strike, companies lose money, it's that simple. And this doesn't just apply to companies directly affect however. The longer the strike goes on, the longer they, your client, won't have the money to pay you. You can't fix the problem, but you may be able to write off the debt that they cause your business. Here's what you need to know about writing off company debt caused by your clients striking workers...

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Analyse financial statements, identify errors with checklists, step-by-step instructions & examples
 
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Warning: Your client's striking works will cost your thousands

Let's say, you supply equipment to a mine. And like they currently are in the platinum industry, the mine's workers are on strike and it's cost them thousands. The longer the strike goes on for, the more money they lose. 
 
This means they may barely have enough money to pay their company lawyers, let alone you. And there will come a point in time where you'll have to write off the money they owe you as bad debt
 
This isn't just a problem for people who do business with the mines though. Anyone whose client is busy fighting a never ending strike action will have to face this problem. 
 
But because strikes are a legal right of South African's, how can you protect yourself against suffering the losses too?
 
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Three accounting record risk areas to watch out for
 
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Do this to protect yourself against bad debt when your client can't pay

Bad debt insurance, or as CBF refers to it, credit Insurance is a very useful tool. This is especially true if your client is in a sector where strikes happen often. This insurance will help protect you against these situations where you and your client are left somewhat helpless. 
If you don't have bad debt insurance, The Practical Accountancy Loose Leaf suggests asking SARS for a tax write off. 
 
To do this, you have to prove to SARS that this money is gone for good and that you've done everything to try getting the client to pay it. Here's what SARS wants you to do before they allow this bad debt to be written off:
 
1. Levy interest on overdue accounts;
2. Perhaps offer settlement discounts;
3. Send reminders to the debtor;
4. Send letters of demand; and
5. Telephonic contact between debt collectors and debtors to follow up on outstanding
6. Payment, and in final instance
7. Pursue legal action. 
 
Use these tips to help you write off the bad debt your clients striking workers are causing you. 
 


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