Collecting Receivables in India - Addl Inputs
Collecting timely Receivables/Payments from Pirvate Corporates as well as the Government is quite difficult forMSMEs and Entrepreneurs. Below are the Solutions and Issues as identified by you. Kindly review them and share any additional inputs. We will soon be taking the whitepaper to Ministry of Finance and MSMEs so actions can be taken to implement these proposed solutions.
We look forward to your inputs!
Collecting Receivables – Key Solutions
1. Government should make some guidelines about the payments to be received by SMEs
2. The deliveries done by the SMEs should be insured (with premium charged)
3. Dishonouring contracts should be made a strict legal offence
4. There should be a law that 50% of the order should be paid before its execution
5. Penalty should be imposed, if the full payment is not made in the credit period stipulated
6. Payment to small entrepreneur must be settled by corporates within a maximum period of
60 days
7. SMEs should have a rating platform where they can rate corporates on doing business and on time payments
8. Government should prepare a list of regular defaulters and take action against them
9. A small scale enterprise should ensure that the suppliers and buyers are educated of their business, capacity and terms & conditions
10. Banks should look at the payment track record of the companies before giving them loans
11. New businesses could hire BBA/MBA interns to facilitate in planning their credit sales and realisation of bills
12. Cheque bouncing cases should be considered as criminal offences with serious repercussions for the errant parties
13. Penalty for delay in payments should be twice that of cost of finance.
Collecting Receivables - Key Issues
1. Corporates and Government entities delay the payments for small entrepreneurs
2. Buyers arm-twist the small players
3. Bad debts are common
4. Many large corporates don’t honor even written contracts
5. Some companies simply refuse to pay irrespective of the credit period
6. Big companies normally ask for very long credit periods. This seriously affects the cash flow of SMEs
7. Many SMEs are forced to shut down due to their payments being stuck
8. Pending receivables also result in small industries not being able to pay to suppliers, resulting in a raw material shortage
9. Many times, bribes are demanded to get the payments cleared
10. An SME at times has to bribe to win business, negotiate on prices, then again bribe and negotiate to collect dues
11. There is very little an SME can do if a large private corporate delays or defaults
12. The overdraft facility in banks cost heavily
13. Most of the small scale units are unable to pay their dues in time
14. Most of the times SMEs fail to speculate credit risk
15. The credit rating mechanism is below average in India and SMEs don’t trust it or know about it
16. There is no effective legal mechanism to address contractual violations on payments by Government departments, private companies. more
We look forward to your inputs!
Collecting Receivables – Key Solutions
1. Government should make some guidelines about the payments to be received by SMEs
2. The deliveries done by the SMEs should be insured (with premium charged)
3. Dishonouring contracts should be made a strict legal offence
4. There should be a law that 50% of the order should be paid before its execution
5. Penalty should be imposed, if the full payment is not made in the credit period stipulated
6. Payment to small entrepreneur must be settled by corporates within a maximum period of
60 days
7. SMEs should have a rating platform where they can rate corporates on doing business and on time payments
8. Government should prepare a list of regular defaulters and take action against them
9. A small scale enterprise should ensure that the suppliers and buyers are educated of their business, capacity and terms & conditions
10. Banks should look at the payment track record of the companies before giving them loans
11. New businesses could hire BBA/MBA interns to facilitate in planning their credit sales and realisation of bills
12. Cheque bouncing cases should be considered as criminal offences with serious repercussions for the errant parties
13. Penalty for delay in payments should be twice that of cost of finance.
Collecting Receivables - Key Issues
1. Corporates and Government entities delay the payments for small entrepreneurs
2. Buyers arm-twist the small players
3. Bad debts are common
4. Many large corporates don’t honor even written contracts
5. Some companies simply refuse to pay irrespective of the credit period
6. Big companies normally ask for very long credit periods. This seriously affects the cash flow of SMEs
7. Many SMEs are forced to shut down due to their payments being stuck
8. Pending receivables also result in small industries not being able to pay to suppliers, resulting in a raw material shortage
9. Many times, bribes are demanded to get the payments cleared
10. An SME at times has to bribe to win business, negotiate on prices, then again bribe and negotiate to collect dues
11. There is very little an SME can do if a large private corporate delays or defaults
12. The overdraft facility in banks cost heavily
13. Most of the small scale units are unable to pay their dues in time
14. Most of the times SMEs fail to speculate credit risk
15. The credit rating mechanism is below average in India and SMEs don’t trust it or know about it
16. There is no effective legal mechanism to address contractual violations on payments by Government departments, private companies. more
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RIGHT FROM ANCIENT TIMES PAYMENT WAS ENFORCED THE DAY IT FELL DUE. EVEN TODAY BUISNESSES BANK ON A QUICK TURNAROUND OF CAPITAL TO LIMIT THEIR INTEREST COSTS. THERE SHOULD BE A MANDATE THAT THE PAYMENTS MUST BE MADE ON THE DAY THEY FELL DUE OR PENAL ACTION BOTH IN TERMS OF PENALTY AND IMPRISIONMENT SHOULD BETHERE, WITHOUT RECOURSE . tHIS WOULD RESULT IN BETTER BUISNESS . dECISIONS MUST BE EXPEDITIOUSLY TAKEN TO IMPLEMENT THE MANDATE DIPAK HIMATSINGKA more
Oct 27
It is indeed a very pertinent issue, and is a matter of grave concern, and one which hampers the growth of SME's. These kind of steps, solutions and directions, if implemented effectively can truly go a long way in ease of doing business in India, improve the sentiment, and encourage more and more people into entrepreneurship, thus, not only taking off the load from employment demand, but also creating more employment. There are handful of entities who operate with bad intentions, and are out to take various suppliers of services and goods, for a ride. First few transactions will be handled very smoothly, and than the delays and total default of payments will start happening. While the SME has the recourse of law, but he gets discouraged by the waiting cycle in the law system, and, meanwhile the habitual defaulter, continues befooling other unaware suppliers of goods and services. I feel, the idea of online rating of entities is a good idea, for the SME's to safeguard their interests. But, this has to be done with a pinch of salt, with proper checks and barriers, so that personal vendetta is not settled in these platforms. To start with, all the entities who have been convicted in a chq. bounce, or payment default case, in lets say last 10/15 years, should be enlisted onto a portal. Every SME, who is listed with departments like ROC, IEC, and similar other organizations, as per his need by filling a necessary online form, should be able to generate an access password for himself to check the credit worthiness of any entity with whom he is starting business. A special cell could be created under the Company Law Board or similar, who would not only update the data about the defaulters, but also a mechanism could be developed, where a SME facing such an issue, while he is fighting out, and considering his options against a defaulter, he should be able to forward soft copies of his papers like invoices etc. to this special cell, who after due verification and diligence, and if found to be a defaulter, his name should be added into the date base. Once the above gets up and working, than this itself will be a big detterent for people with default tendencies, as they will be refused goods/services in future, thus hampering their business. more
Oct 14
Hello, I am traveling from Jammu to Ludhiana by train, I very surprised for cleaning of train. So many Washvesan are blocked and fill with water, And also check power point/ switches are not working properly, and some switches are not properly fixed. Train name: Begampura Exp Date of journey : 9th Oct 2015 at 2:00 pm Regards Pankaj On 7 Oct 2015 10:49 am, "LocalCircles Circle Manager" < support@localcirclesmail.com> wrote: > more
Oct 09
1. Factoring based on receivables of the SME by the bank will solve the working capital problem of SME. 2.Insurance for collections will help. 3.Just as in the case of dishonored cheques, there should be a law for punishing dishonored payments. On 10/7/15, LocalCircles Circle Manager wrote: > more
Oct 09
Primary Observation : The aforementioned points are a list of issues\risks and solutions. Can we link the solutions to issues? Response to Solution pnt #10 : Banks currently do not have a mechanism to monitor the transactions by corporates Response to Pnt #6 : Credit limit is something which is business and market sensitive. While it is good to settle the dues quick, restrictions on timelines will adversely affect competition Response to Issues under Pnt 2, 3, 7, 8 : A proper working capital management approach will resolve these issues well by bringing in robust controls. Govt, may not be able to influence these transactions or bring in policies. However, Solution #7 is a good idea to permit registered SMEs have login to a common platform to rate the buyers and raise disputes\concerns. The issues un-resolved can then be auto escalated to a govt agency overseeing the business practices. Response to Issues under pnt 9, 10 : Do sting operations to uncover such practices and publish them in media. This is more effective that taking help from an already stressed out vigilance dept. Response to Issues pnt 12 : Try traditional chits by forming a pan indian society for SMEs. It is just a matter of starting. more
Oct 08
