According to a 2017 study by US Bank, cash flow is the main reason behind the downfall of 82 per cent of small businesses worldwide.
Debt collection continues to be a challenge for companies operating in the UAE, which ranks as one of the most difficult countries for collecting debt, just behind Saudi Arabia, in a recent poll conducted by international credit insurance company Euler Hermes.
Small to medium sized enterprises (SMEs) make up 95 per cent of the total enterprise population in the UAE. While securing timely payment from clients and customers is critical for businesses of all sizes, non-payment or late payment can be especially challenging for SMEs that may lack the free cash flow or finance facilities larger companies can draw on to manage short-term issues.
Formal pursuit of debts in local court and arbitration forums can also be time consuming and costly with the prospects of successful enforcement not guaranteed. The consequences of non-payment or late payment for an SME can, and often does, affect its ability to continue as a growing concern.
The old proverb ‘prevention is better than the cure’ is particularly applicable to managing debt recovery matters in the UAE. There are three distinct stages in which a business can take effective steps to mitigate its exposure to bad debts:
a. Pre-contract/contract formation
b, Contract management
c. Dispute resolution
This week, we will focus on pre-contract and contract formation. Assessing the credit worthiness of a client, pre-contract, can be invaluable in anticipating potential payment issues, even before a contract is signed. Similarly, understanding whether the customer has a track record of late payment can be helpful in mitigating this issue, whether in terms of controlling the credit extended, or in terms of the protections that need to be built into your contract. Key pre-contract/contract formation considerations include:
1. Assessing credit worthiness through credit checks, background searches and industry feedback. The entity you contract with is also important. Overseas companies may be harder to recover from than those domiciled in the UAE. You also need to consider whether the entity you are contracting with has assets. If not, your ability to recover judgment monies may be limited.
2. Factoring anticipated late payment into credit terms offered, if any.
3. Ensuring the elements of a binding contract and due execution are present. The legal names of the parties must also be correctly stated in the contract.
4. Ensuring the description of the parties’ obligations in the contract is an accurate statement of what will in fact be performed. If the scope of work is not an accurate record of the work performed or the goods supplied, clients/customers could use this to challenge the payment obligation or its quantum.
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5. Provisions should be included that clearly address variations or extensions to the scope of work, such as penalty and interest provisions applicable in the event of late payment. Be explicit on whether non-payment permits the business to suspend services or terminate the contract.
6. Ensuring the dispute resolution clause gives recourse to a suitable forum that will make it commercially viable to pursue claims formally. It is often not commercially viable to pursue small debts in the local courts; recourse to small claims forums can assist here. It is also important that any judgement or order obtained can be effectively enforced against a company or individual in the jurisdiction in which the judgement or order is issued.
7. Where possible, terms and conditions should be future-proofed for changes in the law. An example of this might be a DIFC Small Claims Tribunal clause, which specifies a claim threshold of Dh1,000,000 “or such higher threshold as the law may permit from time to time”. This clause may be effective for the purpose of taking advantage of such a change without having to amend the terms of the contract.
8. Standard terms and conditions should be periodically reviewed by a lawyer to ensure they reflect changes in law. Also, they should address specific issues encountered by SMEs in the course of their business and be ‘fit for purpose’. This minor cost could save large amounts of money if it enables debt issues to be more efficiently and cost-effectively dealt with.
9. Being aware of the relative strength of the contract and the profile of counterparties can enable SMEs to identify and avoid ‘bad contracts’ where the commercial upside in these contracts is disproportionally offset by the risks associated with non-payment and the cost of having to pursue a debt.
10. In some cases, SMEs will have little control over the terms of the contract they enter into, i.e. the terms may be presented on a ‘take it or leave it’ basis. It may also be possible to mitigate risk through extended insurance cover in these cases. Otherwise, it is a case of being aware of and managing risk as efficiently as possible.
11. SMEs should, where possible, seek advanced payments under their payment terms and/or security for payment, such as post-dated cheques (PDCs). PDCs have been a popular method of security due to the criminal consequences of bouncing a cheque. More recently, however, there has been some relaxation of how bounced cheques are dealt with. There have been positive steps in Dubai towards implementing a system whereby bouncing cheques under Dh200,000 will not automatically be considered a criminal offence, which may limit the effectiveness of that security in those cases. With bounced cheques below Dh200,000, a fine may be paid to avoid criminal sanction (and jail time) and to refer the cheques back to the civil courts. For cheques under Dh50,000, the fine is Dh2,000; for cheques between Dh50,001 to Dh100,000, the fine is Dh5,000; for cheques between Dh100,001-200,000, the fine is Dh10,000. However, the new laws are still relatively untested, and if the money cannot be paid back through the civil courts, the cheques may be referred back to the criminal prosecutor.
Andrew Morris is a Partner at Banks Legal, a UAE legal consulting firm
In part two of this series, Mr Morris will offer practical advice to SMEs for mitigating exposure at the contract management and dispute resolution stages
The specs
Engine: 3.0-litre six-cylinder MHEV
Power: 360bhp
Torque: 500Nm
Transmission: eight-speed automatic
Price: from Dh282,870
On sale: now
Match info
Australia 580
Pakistan 240 and 335
Result: Australia win by an innings and five runs
BLACKBERRY
Director: Matt Johnson
Stars: Jay Baruchel, Glenn Howerton, Matt Johnson
Rating: 4/5
Financial considerations before buying a property
Buyers should try to pay as much in cash as possible for a property, limiting the mortgage value to as little as they can afford. This means they not only pay less in interest but their monthly costs are also reduced. Ideally, the monthly mortgage payment should not exceed 20 per cent of the purchaser’s total household income, says Carol Glynn, founder of Conscious Finance Coaching.
“If it’s a rental property, plan for the property to have periods when it does not have a tenant. Ensure you have enough cash set aside to pay the mortgage and other costs during these periods, ideally at least six months,” she says.
Also, shop around for the best mortgage interest rate. Understand the terms and conditions, especially what happens after any introductory periods, Ms Glynn adds.
Using a good mortgage broker is worth the investment to obtain the best rate available for a buyer’s needs and circumstances. A good mortgage broker will help the buyer understand the terms and conditions of the mortgage and make the purchasing process efficient and easier.
MATCH INFO
Juventus 1 (Dybala 45')
Lazio 3 (Alberto 16', Lulic 73', Cataldi 90+4')
Red card: Rodrigo Bentancur (Juventus)
THE BIO
Born: Mukalla, Yemen, 1979
Education: UAE University, Al Ain
Family: Married with two daughters: Asayel, 7, and Sara, 6
Favourite piece of music: Horse Dance by Naseer Shamma
Favourite book: Science and geology
Favourite place to travel to: Washington DC
Best advice you’ve ever been given: If you have a dream, you have to believe it, then you will see it.
if you go
The flights Fly Dubai, Air Arabia, Emirates, Etihad, and Royal Jordanian all offer direct, three-and-a-half-hour flights from the UAE to the Jordanian capital Amman. Alternatively, from June Fly Dubai will offer a new direct service from Dubai to Aqaba in the south of the country. See the airlines’ respective sites for varying prices or search on reliable price-comparison site Skyscanner.
The trip
Jamie Lafferty was a guest of the Jordan Tourist Board. For more information on adventure tourism in Jordan see Visit Jordan. A number of new and established tour companies offer the chance to go caving, rock-climbing, canyoning, and mountaineering in Jordan. Prices vary depending on how many activities you want to do and how many days you plan to stay in the country. Among the leaders are Terhaal, who offer a two-day canyoning trip from Dh845 per person. If you really want to push your limits, contact the Stronger Team. For a more trek-focused trip, KE Adventure offers an eight-day trip from Dh5,300 per person.
Top tips
Create and maintain a strong bond between yourself and your child, through sensitivity, responsiveness, touch, talk and play. “The bond you have with your kids is the blueprint for the relationships they will have later on in life,” says Dr Sarah Rasmi, a psychologist.
Set a good example. Practise what you preach, so if you want to raise kind children, they need to see you being kind and hear you explaining to them what kindness is. So, “narrate your behaviour”.
Praise the positive rather than focusing on the negative. Catch them when they’re being good and acknowledge it.
Show empathy towards your child’s needs as well as your own. Take care of yourself so that you can be calm, loving and respectful, rather than angry and frustrated.
Be open to communication, goal-setting and problem-solving, says Dr Thoraiya Kanafani. “It is important to recognise that there is a fine line between positive parenting and becoming parents who overanalyse their children and provide more emotional context than what is in the child’s emotional development to understand.”
US federal gun reform since Sandy Hook
- April 17, 2013: A bipartisan-drafted bill to expand background checks and ban assault weapons fails in the Senate.
- July 2015: Bill to require background checks for all gun sales is introduced in House of Representatives. It is not brought to a vote.
- June 12, 2016: Orlando shooting. Barack Obama calls on Congress to renew law prohibiting sale of assault-style weapons and high-capacity magazines.
- October 1, 2017: Las Vegas shooting. US lawmakers call for banning bump-fire stocks, and some renew call for assault weapons ban.
- February 14, 2018: Seventeen pupils are killed and 17 are wounded during a mass shooting in Parkland, Florida.
- December 18, 2018: Donald Trump announces a ban on bump-fire stocks.
- August 2019: US House passes law expanding background checks. It is not brought to a vote in the Senate.
- April 11, 2022: Joe Biden announces measures to crack down on hard-to-trace 'ghost guns'.
- May 24, 2022: Nineteen children and two teachers are killed at an elementary school in Uvalde, Texas.
- June 25, 2022: Joe Biden signs into law the first federal gun-control bill in decades.
The Specs
Engine 3.8-litre, twin-turbo V8
Transmission: eight-speed automatic
Power: 582bhp (542bhp in GTS model)
Torque: 730Nm
Price: Dh649,000 (Dh549,000 for GTS)
What is a robo-adviser?
Robo-advisers use an online sign-up process to gauge an investor’s risk tolerance by feeding information such as their age, income, saving goals and investment history into an algorithm, which then assigns them an investment portfolio, ranging from more conservative to higher risk ones.
These portfolios are made up of exchange traded funds (ETFs) with exposure to indices such as US and global equities, fixed-income products like bonds, though exposure to real estate, commodity ETFs or gold is also possible.
Investing in ETFs allows robo-advisers to offer fees far lower than traditional investments, such as actively managed mutual funds bought through a bank or broker. Investors can buy ETFs directly via a brokerage, but with robo-advisers they benefit from investment portfolios matched to their risk tolerance as well as being user friendly.
Many robo-advisers charge what are called wrap fees, meaning there are no additional fees such as subscription or withdrawal fees, success fees or fees for rebalancing.
SPECS
Engine: Two-litre four-cylinder turbo
Power: 235hp
Torque: 350Nm
Transmission: Nine-speed automatic
Price: From Dh167,500 ($45,000)
On sale: Now
PROFILE OF STARZPLAY
Date started: 2014
Founders: Maaz Sheikh, Danny Bates
Based: Dubai, UAE
Sector: Entertainment/Streaming Video On Demand
Number of employees: 125
Investors/Investment amount: $125 million. Major investors include Starz/Lionsgate, State Street, SEQ and Delta Partners
Bio
Age: 25
Town: Al Diqdaqah – Ras Al Khaimah
Education: Bachelors degree in mechanical engineering
Favourite colour: White
Favourite place in the UAE: Downtown Dubai
Favourite book: A Life in Administration by Ghazi Al Gosaibi.
First owned baking book: How to Be a Domestic Goddess by Nigella Lawson.
Company profile
Company name: Fasset
Started: 2019
Founders: Mohammad Raafi Hossain, Daniel Ahmed
Based: Dubai
Sector: FinTech
Initial investment: $2.45 million
Current number of staff: 86
Investment stage: Pre-series B
Investors: Investcorp, Liberty City Ventures, Fatima Gobi Ventures, Primal Capital, Wealthwell Ventures, FHS Capital, VN2 Capital, local family offices
Sri Lanka v England
First Test, at Galle
England won by 211
Second Test, at Kandy
England won by 57 runs
Third Test, at Colombo
From Nov 23-27
Ant-Man and the Wasp
Director: Peyton Reed
Starring: Paul Rudd, Evangeline Lilly, Michael Douglas
Three stars
Gully Boy
Director: Zoya Akhtar
Producer: Excel Entertainment & Tiger Baby
Cast: Ranveer Singh, Alia Bhatt, Kalki Koechlin, Siddhant Chaturvedi
Rating: 4/5 stars
The five pillars of Islam
Lewis Hamilton in 2018
Australia 2nd; Bahrain 3rd; China 4th; Azerbaijan 1st; Spain 1st; Monaco 3rd; Canada 5th; France 1st; Austria DNF; Britain 2nd; Germany 1st; Hungary 1st; Belgium 2nd; Italy 1st; Singapore 1st; Russia 1st; Japan 1st; United States 3rd; Mexico 4th
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
DEADPOOL & WOLVERINE
Starring: Ryan Reynolds, Hugh Jackman, Emma Corrin
Director: Shawn Levy
Rating: 3/5
Company Profile
Company name: Yeepeey
Started: Soft launch in November, 2020
Founders: Sagar Chandiramani, Jatin Sharma and Monish Chandiramani
Based: Dubai
Industry: E-grocery
Initial investment: $150,000
Future plan: Raise $1.5m and enter Saudi Arabia next year
RESULTS
5pm Maiden (PA) Dh70,000 (Dirt) 1,400m
Winner AF Nashrah, Tadhg O’Shea (jockey), Ernst Oertel (trainer)
5.30pm Maiden (PA) Dh70,000 (D) 1,400m
Winner Mutaqadim, Riccardo Iacopini, Ibrahim Al Hadhrami.
6pm Maiden (PA) Dh70,000 (D) 1,600m
Winner Hameem, Jose Santiago, Abdallah Al Hammadi.
6.30pm Maiden (PA) Dh70,000 (D) 1,600m
Winner AF Almomayaz, Sandro Paiva, Ali Rashid Al Raihe.
7pm Handicap (PA) Dh70,000 (D) 1,800m
Winner Dalil Al Carrere, Fernando Jara, Mohamed Daggash.
7.30pm Handicap (TB) Dh70,000 (D) 1,000m
Winner Lahmoom, Royston Ffrench, Salem bin Ghadayer.
8pm Handicap (PA) Dh70,000 (D) 1,000m
Winner Jayide Al Boraq, Bernardo Pinheiro, Khalifa Al Neyadi.
PROFILE OF HALAN
Started: November 2017
Founders: Mounir Nakhla, Ahmed Mohsen and Mohamed Aboulnaga
Based: Cairo, Egypt
Sector: transport and logistics
Size: 150+ employees
Investment: approximately $8 million
Investors include: Singapore’s Battery Road Digital Holdings, Egypt’s Algebra Ventures, Uber co-founder and former CTO Oscar Salazar
Naga
Director: Meshal Al Jaser
Starring: Adwa Bader, Yazeed Almajyul, Khalid Bin Shaddad
Rating: 4/5