Tag: B2B

For running a successful business, the business owners must establish and maintain a significant Accounts Receivable (AR) management strategy. Proper Accounts Receivable process positively impacts the company as it affects the marketing activities, sales approach, and customer services. People in business always focus on having accurate accounts receivable because if they fail to do the same, their business will have to face problems.

Optimization of the Accounts Receivable process is essential for the business as it affects the business’s various aspects, but many business owners do not understand its importance. Optimization of Accounts Receivable Process increases liquidity as it prevents wastage of existing capital. Due to the increase in the business’s liquidity, the company performs better. It reduces its debt, costs, and funds growth, ultimately helping the business owners grow among their competitors.

As optimization of Accounts Receivable is a crucial part, you can start this process early. Mostly, business owners focus on sales aspects and give importance to ways to increase sales, and they underestimate the importance of the Accounts Receivable function, and they do it later. Instead, if they start the Accounts Receivable process early, they will discuss various topics such as payment terms as the beginning of the customer relationships. Another example of starting the process first is to get a new customer on board by electronic payments.

As business owners do not understand the Accounts Receivable process’s importance, their business faces several problems. Low Accounts Receivable practices result in wastage of time, efforts, and resources of the company, which negatively impacts almost all the aspects of the business. Because of the poor Accounts Receivable process, there will be no accuracy in invoices and bills resulting from which the reports will be of no potential use. So, to make your business successful, you should follow the best practices as early as possible.

Best Practices for implementing Accounts Receivable Collections

1. DEVELOPMENT OF A COLLECTION PLAN:

You can ask your customers about the day most convenient for them to make before making the invoice. Business agreement plays a vital role in finalizing the due date as you can ask some customers to make payments monthly and some weekly.

Various other factors help you make the new business agreement to check your business’s cash flow position. So if you need cash quickly, you can ask your customers to make payment early.

You can also check your customer’s payment history to make the new agreement if they make their payments on time. You can be lenient, or otherwise, you will have to create a new payment plan to receive timely payments from your customers.

You can also look at the billing practices of the field in which you operate to decide if you can follow those billing practices and provide an advantage to your customers by providing more time according to your business conditions.

To streamline the Accounts Receivable process, you can use electronic devices as you can send invoices to your customers electronically so that you can maintain proper and better records.

2. DOCUMENTATION OF THE COLLECTION PROCESS:

After developing the collection plan, you need to ensure that your plan is working effectively and all your customers are following your procedure. You need to document your Accounts Receivable collection process to check the effectiveness of your collection plan.

The documentation of the Accounts Receivable process will help you to reduce errors in billing. You can also audit and optimize your strategy and also to minimize input errors. You can automate some processes or do them electronically.

3. LOG ALL CHARGES AND EXPENSES CONCURRENTLY:

To keep all receipts, orders, and requests in the system for the next invoice, you should scan all these as soon as they arrive. Your staff can anticipate the task for completion of you delegate them the responsibility of invoicing.

4. INCENTIVES FOR MAKING EARLY PAYMENTS:

It is essential to make timely and consistent payments from your customers, as it is an important business aspect. Though there may be situations that companies do not have a good cash position in their business, with the help of various incentives such as discounts, you can motivate your customers to make timely payments.

5. MAINTAINING GOOD RELATIONSHIPS:

You need to ensure that your staff members maintain good relations with your customers and clients. You should understand the feeling of your clients and respect them also. It will help you to preserve Accounts Receivable properly.

6. EFFECTIVE PAYMENT STRATEGY:

There will be some situations where your customers will not make timely payments, even if your staff members maintain healthy relationships with them. It can negatively impact your business’s cash position, reduce your revenue in return for the goods you sell, and if conditions get worse, it can result in bankruptcy.

Though for your business’s smooth running, you should not let these conditions affect your cash flow position in the industry. Sometimes even your customers who always made timely payments will not make timely and consistent payments; in such cases, you can follow the following steps. You can make a friendly call to your customers and clarify if they need more time.

After five days, you can call them again if they do not make the payment and ask them to make payment. You also choose to meet them personally, or you can also use electronic media. By email, you can explain your concerns.

If they do not make the payment, you can send them a Letter of Demand. And receiving the Letter of Demand, if you again do not receive payments from them, you can hand over the case to your debt collection agency, which will help you recover the amount they owe to you. To avoid such circumstances, you can set up all payment expectations at the beginning of the relationship, yielding you better outcomes.

These are the best practices that will help you streamline your Accounts Receivable process and your business. Documentation of your operation, planning, sticking to your plan are the various factors that will help you to increase the working efficiency of your employees, and they will be consistent while handling multiple collections.

To smooth your business and growth, you should follow such practices for the Accounts Receivable Process.

In today’s world, most business to business transaction run on a credit basis largely than on a cash basis, and people do not make instant payments after they place an order. So, people in business send invoices to their customers in which they mention the number of days within which the customers have to make payment.

As the customers take time to make the full and final payment, the business owners give their customers a deadline to make the payment. Companies also provide these credit facilities to their unique or frequent customers which helps them to avoid the hassle of making physical payments every time whenever a transaction occurs between the company and the customers. For example: on top of the invoices businessmen mention the days as “net 30” which means that the customer will have to make the payment within 30 days from the date he receives the bill.

As the customers take time to make the full and final payment, the business owners give their customers a deadline to make the payment. Companies also provide these credit facilities to their unique or frequent customers which helps them to avoid the hassle of making physical payments every time whenever a transaction occurs between the company and the customers. For example: on top of the invoices businessmen mention the days as “net 30” which means that the customer will have to make the payment within 30 days from the date he receives the bill.

Companies make Accounts Receivable when they do their business on a credit basis. Accounts Receivable helps the company to find out its strength with the use of Accounts Receivable Turnover Ratio or Days Sales Outstanding. Companies find out its Turnover Ratio with the help of the following formula: Sales on Credit/ Average Accounts Receivable. With the help of this ratio, the companies also ensure that the percentage of accounts receivable in comparison to the sales remain fairly consistent.

In business terms, it is better to have lower accounts receivable balance which means along with placing orders your customers are making the payment quickly. Companies believe that along with growing business, your accounts receivable balance will also grow along with time as your sales to the customers will increase. Accounts Receivable is an asset and so is shown on the Assets side on the balance sheet representing money due to a customer in the short-term.

In business terms, it is better to have lower accounts receivable balance which means along with placing orders your customers are making the payment quickly. Companies believe that along with growing business, your accounts receivable balance will also grow along with time as your sales to the customers will increase. Accounts Receivable is an asset and so is shown on the Assets side on the balance sheet representing money due to a customer in the short-term.

Also, you will not be able to make payments to your suppliers which may result in stoppage of production in your business. It will follow in which you will not be able to make delivery of the goods to your customers because of the same reason, and fast growth is challenging for small companies.

To avoid such problems, tracking accounts receivable is vital so that you can recover money from the customers that they owe to you. Companies prefer to maintain proper records of accounts receivable which helps them to identify customers who owe payment to them. Also, they can easily know the amounts that the customers owe. These proper records also help the companies to decide which customers to chase down for payment in return for the goods.

With the help of proper records and the right strategies for maintaining accounts receivable, you will maintain adequate amounts of cash in your account, which is necessary for any company to grow. An excellent performance indicator would be not to have more than 15-20% total accounts receivable in 90 days category.

Accounts Receivable of your company:

• Provide incentives to customers making quick payments: Incentive is a perfect option for companies to get faster payments from their customers. Incentives can include discounts, gift vouchers, or coupons. If you let your customers pay at their schedule, they will treat it as an interest-free loan. For motivating your customers to make quick payments, a discount is a significant incentive.
• Establishing a line of credit: Companies can also establish a line of credit. While you are waiting for payments from your customers, if you need money for your business, you can withdraw from this line of credit. But establishing a line of credit has a disadvantage that you will have to pay interest for the money you withdraw from the line of credit, and it can also include additional fees which are necessary to pay to keep your line of credit open.
• Outsourcing facilities: Instead of wasting your time and efforts on chasing your customers and asking them to make payments on time, you can make use of the outsourcing facilities. It will reach out to your customers and ask them to make payments, and in return, they will charge fees for the successful payments. Also, if you do not want to waste money on these outsourcing facilities, you can ask them to collect payments from problematic customers only.
• Penalizing customers: You can even penalize your customers who do not make payment within the due date. This penalty can be a percentage of the invoice total. These penalties ensure that your customers will make timely payments in the future.
• Factoring: It is commonly called Accounts Receivable financing. It is one of the great ways to improve cash flows. In the process of factoring, there is a factoring company to which you transfer the invoice after issuing. With the help of it, you need not wait for the customers to make payment as they already pay you 80-90% of the invoice amount. The factoring company makes the rest of the payment to you when they receive the payment from your customer. They pay you the remaining portion of the invoice after charging the service fee.

Difference between Accounts Receivable and Accounts Payable

The primary difference between Accounts Receivable and Accounts Payable is that Accounts Receivable is the amount that your customers owe to you, and Accounts Payable is the amount that you owe to your suppliers. The abbreviation for Accounts Payable is ‘AP’, and you should be able to find out a balance between the two. To ensure enough availability of cash, you can extend the due date of your bills and at the same time shorten the time limit your customers take to make payment to you. It will also ensure that at times you will not face any cash crises. You should focus on decreasing the amounts of outstanding accounts receivable which will also improve your immediate cash position.

As we all know, the Reserve Bank of India (RBI) allowed all financial institutions to grant a three-month moratorium on all term loans due to the outbreak of COVID-19 and the subsequent lockdown.

The Reserve Bank of India (RBI) has decided to amortize both borrowers and lenders against the unprecedented disruption caused by the Covid-19 outbreak, giving consumers a three-month grace period on loan repayments. It also provided banks with breathing space for default tagging in the event of customers missing payments.

Have a look at few questions and answers related to this EMI holiday which may rise in the public minds and get some meaningful insights!

Q: My EMI is due soon. Will the payment not to be deducted from my account?

A: The RBI has only allowed banks to permit a moratorium. Different banks would need to require EMIs to be suspended which means unless you have explicit permission from your bank, your EMIs will still be deducted from your account.

Q: How can I Know, whether my EMI was suspended or not?

A: The RBI has not yet given any detailed guidelines on this. Once the guide lines are released, there will be more precise clarification on this.

Q: How Banks will process?

A:  All banks will have to discuss the moratorium and have a decision approved by their board of directors. Once approved, customers can be contacted to notify them of the moratorium.

Q: What type of banks can offer their clients this deferment?

A: All commercial banks which include:

• National rural banks
• Small finance banks
• Local area banks
• Cooperative banks
• All-India Financial Institutions
• Housing finance companies
• Microfinance institutions

Q: Is it a waiver of the EMIs or a deferment of the EMIs?

A: This is not a waiver, but a hold. RBI suggested that the repayment schedule and all subsequent due dates, as well as the tenor for such loans will be extended by three months across the board.

Q: Does this moratorium extend to both principal and interest?

A: Yes, yes. It is. If you are informed by your bank, you will be excluded from payment of the entire EMI, including payment and interest, for a period of three months. This will refer to all loans outstanding as of 1 March 2020.

Q: What kind of loans is covered by this moratorium?

A: The RBI policy statement specifically addresses term loans, which include:

• Home loans
• Personal loans
• Education loans
• Auto loans
• Other fixed-term loans: include long-term consumer loans, such as mobile EMIs, refrigerators, TVs, etc.

Q: Does the moratorium cover the use of credit cards?

A: As credit cards are known as revolving credit and not term loans, they are not subject to a moratorium.

Q: I took a project loan to set up a company. Do I need to pay for my EMI?

A: A moratorium has been issued on any loan known as a term loan. When the bank is persuaded that you are not in a position to pay the EMIs, you will obtain a deferral.

Q: What has been announced by RBI for businesses?

A: The RBI has allowed interest payments to be deferred for all working capital loans taken by businesses. This will apply with respect to all operating capital assets pending as of 1 March 2020. Accumulated interest will be accrued for the duration after the expiry of the deferment period. The moratorium / deferral will not be viewed as a modification in the terms and conditions of the loan agreements and will not result in the reduction of asset classification.

Most of the individuals will benefit from the RBI’s relaxation of loan repayment which include retail borrowers, micro, small and medium enterprises and large companies.

In most companies, debt collection is an unfortunate reality. If buyers are eventually unable to pay for their purchase, the effect of those missed dollars can be significant. In particular, the inability of small businesses to recover unpaid accounts receivable could have major consequences. In such circumstances, companies can use a variety of methods to obtain past due invoices, such as phone calls, e-mails, letters and site visits which may be time-consuming and expensive.

When it comes to keeping ahead of bad debt, what techniques can you follow to ensure the outstanding debt is recovered in the most timely and cost-effective manner? Let’s discuss some of the most popular business debt collection best practices and how they operate!

1. MAINTAIN A RECORD OF ALL YOUR TRANSACTIONS

Maintaining a record is crucial for monitoring which debts have progressed or already progressed. It is usual for companies who have a number of existing loans to manage to make a claim on their debtors. Such unfair practices also lead to a liability on the part of the borrower, who might find himself unable to recover the debt due to lack of demand within the time laid down by the legislation.

2. KEEP TRACK OF DELINQUENT DEBTORS 

One of the benefits associated with keeping track of your company debt collections is that you can track which debtors have higher paid potential than others. In addition, you can keep track of delinquent debtors who fail to pay on time or request a range of extensions of time. On the basis of the data you have obtained, you can strategize and choose to invest with debtors rather than with delinquents. Such a strategy will not only increase your business through debt collection, but will also make the process simpler and more effective.

3. KEEPING AN UPDATED RECORD IS IMPORTANT 

Most of the businesses often change their branding or contact details. Debtors can change their addresses and become unpayable. It is also prudent for you to keep track of your debtors and update your records in the event of any changes to their contact details or business circumstances. It is important that the creditor is one of the first persons to learn when the paying ability of the debtor has increased. Through keeping track of the credits in your debtor’s account, the company will recover unpaid debts until it starts to struggle to recover unpaid debts.

4. INITIATE COLLECTIONS WITH A DEMAND LETTER

A demand letter is a written notification that the client owes you a debt and that you will not waive the debt. Whether you go to court or even arbitrage, you should think of a complaint letter as a paper trail. It’s a record of your attempt to make a payment. You have now passed beyond late notices to the debt collection system.

Demand letters typically include the following information:

• The names of the businesses creditor and the debtor
• Notification of debt collection informing the debtor of their due payments
• A timeline by which the business debtor is to make the payment and a warning that failure to pay within the period given are grounds for litigation by the business creditor.

5. DEBT RECOVERY LITIGATION

In the case of settlement efforts will not materialize in compensated assets, the law provides borrowers with a solution before the court to bring small claims lawsuits for minor debts or civil debt cases involving substantial amounts of money. Managing a company and engaging in debt collection litigation can be very tedious and difficult to manage. As a result, businesses also employ attorneys to conduct the collection on their behalf.

6. HIRING A DEBT COLLECTION AGENCY

Businesses struggling with numerous debts may hire the workforce of debt collection agency services. There are several advantages of investing in the debt collection business.

• They can reduce the workload. Debt collection companies will do all the hard work for you. Keeping a record and monitoring your debtors can be challenging when you’re running a large-scale company. Engaging in transactions and making requests can become daunting and can even lead to the detriment of your company if it is not properly managed.
• They have expertise and experience in the area of business debt management. Business debt management can be very complex for start-up companies and can lead to uncertainty and inability to fully exercise their rights as company creditors. Debt collection companies also consist of skilled professionals who are ideally qualified to work with you.

Applying the best management practices in corporate debt collection will help you handle your company accounts more effectively and conveniently. If you are an owner of a business and are owed to payments from another business, call us or email us for assistance in b2b debt collection.

While running a business, collecting the past due payments from your business customers can be one of the most daunting aspects. Here’s a simple fact: It’s easy to make a mistake when engaging in debt collection for companies that aren’t specialized in debt recovery. In fact, the debt recovery industry is so mired in regulation that the likelihood of making a mistake is quite high.

If you are building your credit program, you may not be familiar with some common errors or mistakes that business owners make while collecting past due accounts.

Here is the list of some common mistakes that may encounter while collecting b2b debts from your customers.

1. UNAWARE OF THE EXPENSES THAT ARE INCURRED IN DEBT RECOVERY

Before you focus on an initiative to recover your business client’s past due receivables, it is important to evaluate the costs that are imposed in debt recovery process and so, that you can know whether your collection efforts are going to be justified or not. During such circumstances, a collection agency will help you determine what those expenses are.

2. HARASSING THE CUSTOMER UNINTENTIONALLY

There are several laws that companies need to obey while seeking to get back their client’s debt. Such rules prohibit a debtor from intimidating or harassing a customer while attempting to recover a debt. Excessively persistent or forceful demands may constitute harassment which is contrary to the rules on debt collection. These conduct sanctions include punitive damages, or even litigation. Before dealing with debt collection, you need to make sure that you are aware of the debt collection laws in your area to avoid such penalties.

3. NO CREDIT POLICY

In general very few businesses have a credit policy which holds a potential impact while recovery of debts. A credit policy identifies low, medium or high risk clients. This segmentation will help you set guidelines on credit limits and help organize collections. If you don’t have a good credit policy, you could end up extending credit without taking precautions to everyone. That can leave you with a lot of unpaid debt from past due invoices.

4. OUTDATED CLIENT RECORDS

Unlike outdated client records, updated client records allow you to detect the raise of potential debt issues. It allows you to take control of a debt issue, rather than the debt that controls your business. We all know about seemingly prosperous firms that just went bankrupt because they didn’t have enough cash to keep doing business. If you allow bad debtors to dominate your corporation, you’ll probably follow the same path. The most useful resource when it comes to managing a business is an actual client record. It will help you monitor customer behaviour and curb debt problems before they are going to happen.

5. IRREGULAR FOLLOW-UPS

A clear follow-up strategy helps you get paid more quickly and avoid bad debts. Additionally, prompt collection of past due accounts will help you maintain a healthy cash flow. A good follow-up system includes getting in touch with debtors on time, setting credit limits, credit checks and implementing a good credit policy. Hence, following through on any past due balances is essential to increase your chances of debt recovery promptly and consistently.

FAILING TO COMMUNICATE ON A DAILY BASIS

Lack of timely and regular communication with debtors will leave you with huge sums of unpaid debts. It’s important to always note that communication is a key to the relationship between debtor and creditor. Companies that use only one or two methods like sending emails and letters to reach a past due clients aren’t going to be reliably imaginative enough to get the job done. A telephone call is surely one of the best channels of communication, and it becomes even more difficult to ignore someone when they speak directly to you.

WAITING TOO LONG TO HIRE A COMMERCIAL B2B DEBT COLLECTION AGENCY

Most businesses are too patient when it comes to debt collection, and wait too long before contacting a commercial debt collection agency. The main reason behind this phenomenon is the fact that their account receivables do not set the payment deadlines. It is prudent to be rather impatient when it comes to debt collection. Waiting longer to employ a debt collection agency to recover your past debts is one of the most common mistakes that companies make when they try to collect past debts.

It can be challenging to receive payments on time. When trying to recover your past due debts, one of the best things to do for your company is to hire a commercial b2b collection agency as soon as your client is already 90 days late in paying your invoice. At Kenstone Capital, We help you cultivate and retain positive working relationships with your customers by providing our clients with non-contentious solutions through our amicable debt collection services. We specialize in helping businesses to collect their past due receivables. Call or email us for a free consultation and get a free price quote!

Many companies work hard to maximise debt collection performance by closely working with their collection teams and Debt Collection Agencies (DCAs). However, many business owners encounter many challenges on a daily basis due to lack of proper planning while collecting the debts from their customers.

LET’S HAVE A LOOK AT THE CHALLENGES OF B2B DEBT COLLECTION AND THE STEPS TO OVERCOME THOSE!

HELPING CLIENTS WHEN THEY RECEIVE DEBTS FROM OTHER BUSINESSES

To become successful, every company must strategically balance its costs with its revenue. When you look at your summary of cash flows, you may find that some losses are not due to routine operating expenses, but rather due to the money owed by other businesses.  Unfortunately, sometimes these losses may exist for a long time.

It is no more surprising that most of the companies rely on one another and work together to achieve better results. While working together, other business owners should understand the importance of prompt invoice payment, as delay of payment will throw off the budget and operations. While you place more emphasis on handling your employees, monitoring operations, and aligning your books, the very last thing you have to worry about is undertaking collections from obstinate firms that are reluctant to pay. Keep an eye on your finances by allowing us to manage your debt collections from business to business.

A DISTINCTIVE STRATEGY TO COLLECT B2B DEBTS

Whether you are a vendor, supplier or offering other business benefits, your customers need to pay their invoices in a timely manner so that you can keep track of your profits. Many key differences distinguish consumer collections and B2B collections which may often won’t work properly. Hence, our law firm has come up with innovative approaches on behalf of our clients for recovering company debts.

It is always noticeable that certain companies ‘ debts tend to be higher than the individual customers ‘ debts. Therefore business-to-business debts will have a greater impact on your profit margin and could even negatively impact the profitability of your company in the case of premium clients. In this scenario, when filing for bankruptcy and wrapping up operations, a debtor can try to postpone any payments. At that time you’ll never see a dime even after the company closes. This situation is more common than you think, as many owners choose to shut down their business rather than continuing to increase their debt.

Since B2B debt collections are specific, never employ a consumer collection agency to recover debts from business customers. Call us for the assistance and successfully handle B2B debt collection.

AN ON-GOING GUIDANCE TO MAINTAIN YOUR B2B RELATIONSHIPS

Once companies try to recover debts from customers, they are reluctant to maintain a relationship with that customer. Consequently, consumer collection departments and agencies often use blunt or even threatening methods to receive payment. If you want to treat your business customers differently, particularly those who can place large orders once their budgets are back on track, then approach us as we treat b2b collections with a view to maintaining relationships. Secondly, when dealing with your business clients, we never use threatening or unprofessional methods. We keep it professional so that we don’t impact the company’s image at all— because we reflect you.

Most B2B collections start with a letter of demand, where all it takes is a letter from an accomplished tax attorney to reassure an owner that you are adamant about debt recovery. Upon receiving the letter, the company may want to prevent further legal action and may reach out on the debt.

In some circumstances, a business may suffer a temporary setback or lack of liquidity that prevents it from paying debt right away. At that time, we may reach an agreement that the company will be able to make lower payments or implement an instalment plan instead of paying off the debt in total simultaneously.

Contact us for Assistance Today

If you are an owner of a business and are owed to payments from another business, especially if that debtor company knows how to avoid payment, the path to recovering the debt can be extremely challenging. In such cases, you should focus on running your company, not constantly struggling for payments with other businesses and allow us to seek payment on your behalf of B2B debts. Call or email us online to discuss how we can support you today.

The supreme court, in their latest judgment, has extended the SARFAESI act to cooperative banks. SARFAESI Act or Security securitization and reconstruction of financial assets and enforcement of security interest act, 2002, were earlier applicable to commercial banks only. This change adds some new advantages to the cooperative banks.

In this article, we will talk about what exactly is the act and how it helps the banks.

WHAT IS THE SARFAESI ACT?

This act was passed in December 2002 to help loan lenders to retrieve their money from borrowers who are unable to pay their dues. This act helps Financial Institutions in loan Money retrieval by permitting them to quickly sell resources of the person who failed to pay the loan amount.

Before 2002, banks had to take a long path involving the judiciary to recover their loan amount. This entire process was highly time consuming for the bank and elongated the next loan sanctioning period.

The inception of the SARFAESI Act in 2002, the financial institution was grant power to sell the attached assets of the borrower upon unsuccessful repayment.

The bank would take over the ownership of the assets. It keeps the banks out of judicial involvement and therefore saves them a lot of time.

However, this act had disadvantages for unsecured lenders. Some of these were taken care of in the insolvency and bankruptcy code, 2016.

WHY IS THIS LAW NECESSARY?

In the 2002 version of the law, there was no provision for cooperative banks. In 2003, the central government released a new statement, which talked about integrating cooperative banks under the rest of the banks in the SARFAESI act.

However, the actual amendment enacted in 2013 only, the cooperative banks were formally inducting in the financial institutions’ league under the SARFAESI act.

Many people raised questions about the changes made in the act. On 5th May 2020, the final decision to induct cooperative banks was validated by the supreme court.

It helps the cooperative banks quickly recover their loans, helping them save time and making the loan sanctioning and recovery process shorter for both the bank and customers.

If we look at the Indian banking system’s statistics, 2020 has around 1500 urban cooperative banks and about 95000 rural cooperative banks.

If we look at the statistics, various cooperative banks have around 1500+ and 95000+ branches in the urban and rural provinces, respectively.

Looking at these statistics regarding the size of cooperative banks in the Indian banking system, we can easily understand this act’s importance.

Running after unpaid invoices can be too tiring. Sometimes retrieving money from your customers may not seem such a challenging task. But trust me, in some cases, you might require professional help. Get more information about the free lord of the ocean.

Research says that opportunity costs because of delay in payments can destabilize a company’s profit for up to 5 years. But, retrieving money from debtors may not be your cup of tea. To assess the need for professional help, you must first understand your condition. The skills of your employees may not on par with debt collection tactics. A professional debt collection agency is an expert in the collection industry and knows every situation’s minute details. It makes more comfortable for your company to get the money back without the loss of significant customers.

How do you figure out that you need a debt collection agency, and when should you take that step?

DOES YOUR BUSINESS NEED A DEBT COLLECTION AGENCY?

Figuring out whether your business needs a debt collection agency can be tough, especially when you are a small start-up. It would be best if you looked forward to hiring a debt collection agency when you feel that your losses are accumulating more, and you are not in a position to handle them any longer.

A US Bank study has proved that almost 82% of businesses fail due to the company’s cash flow issues.

To make your job easier, here are six factors that determine whether you need a debt collection agency or not.

1. Lack of specialized employees: You don’t have employees competent enough to handle debtors.
2. Lack of time: This may correspond to your urgency to get the money back and lack of proper support for that.
3. Harsh debtors: Your debtors are too loud and too harsh for your regular employees to handle.
4. High cost: The resources, as well as the money you are spending on getting your money back, are way more than hiring an agency.
5. Small debts from a large number of customers: The balance of your pending invoices might be low, but the amount is large, so it might be a waste of time and resources to deploy your employees out there.
6. Lack of competency: Your Company doesn’t have enough skills or knowledge to get the money back from difficult debtors who have either disappeared or bankrupt.

Always keep in mind the above factors before you go on to hire a debt collection agency.

THE RED FLAGS OF DANGEROUS DEBT SITUATIONS

Below are a few red flags that enable you to understand that it’s high time to hire a debt collection agency. Ignoring these red flags may be quite harmful to your business in the long run.

A. WHEN YOUR CUSTOMER’S CHEQUE BOUNCE

In such a case, debt collection agencies can analyse your customer’s credit history and save you a lot of money.

B. UNPAID BILLS OF OVER 90 DAYS.

According to data, after 90 days, you lose roughly 10% per month on overdue commercial balances.

It is rightly said that timing matters a lot. If you have a lot pending in your 90-day column, then it’s undoubtedly time that you hire a debt collection agency.

C. NOT FAMILIAR WITH LAWS?

When your company isn’t a pro in legal dealings regarding collection protocols and regulations, debt accumulation becomes extremely difficult.

Debt collection agencies are well versed with all the state and corporate law regarding debt collection. So, hiring a debt collection agency can reduce risks of money loss for your company.

D. A WIDE CUSTOMER NETWORK.

When your customers are far-off, it becomes more difficult for you and your employees to locate and handle them.

Here debt collection agencies play a vital role in locating such customers and retrieving your money back.

Apart from the above factors and red flags, several other reasons necessitate the need for a debt collection agency.

E. GET YOUR MONEY BACK SMOOTHLY.

Debt collection agencies are competent enough for handling debtors that they retrieve all your money hassle-free. They have more advanced tools to manage defaulters like skip tracing and credit history analysis. These methods can fasten the cash flow process. A right debt collection agency also takes care of the cost-effectiveness of the process.

Wayne Vidzicki, the Director of Collections and Premium Audits at Berkshire Hathaway GUARD Insurance Companies, once said that you always wish to unravel debt issues as promptly as possible. Because the longer it takes, the lower the probability gets.

A debt collection agency sorts out this problem of finances and quickly and steadily increases the cash flow.

F. GET EXCELLENT LEGAL PROTECTION AND ADVICE.

When you face a well-informed customer, you can easily fall into legal entrapment. Handling legal matters often gets complicated.

A debt collection stays updated with all the legal proceedings and safeguards your company against severe legal webs.

Not only debt collection agencies safeguard your rights, but they also advice and counsel debtors to get out of debt. Hiring the right debt collection agency also improves the relationship between you and your customers.

G. STAY FREE FROM DOCUMENTATION WORRIES.

Documentation is a vital part of the debt collection process. A debt collection agency keeps records in great detail for your company to analyse. It also proves beneficial in case of legal deceptions.

Proper documentation keeps your debt collection details in order, which you can check and sort out later.

Conclusion

To avoid your business failing due to a lack of sufficient profit, you must pinpoint a situation where you can no longer handle debtors without professional help.

Hiring debt collection agencies might help your business recover losses that would have been otherwise difficult to retrieve.

A right debt collection agency uses their skills and knowledge to protect your company from harsh and rude debtors who are in no mood to pay your debts. They also look after all your legal matters regarding debt collection. With proper documentation of records, debt collection agencies offer you the liberty to smoothly run your company without the fear of losing money via inefficient payments.

Given the steep property prices, it is almost inevitable to follow the Home loan route when purchasing residential property. While it may seem like a prudent choice at first, one must also remember that a Home loan is also a financial commitment. During the long duration of the tenure, unforeseen circumstances may arise which may lead to mortgage default. If a health issue or a job loss leads to inability in paying Home Loan EMIs there a few ways one can deal with the situation at hand as we will explore later here.

What is a mortgage default?

A loan agreement dictates that a borrower must pay a fixed amount of money to the lender every month. If a borrower is unable to keep this financial and legal agreement then we have a loan default. Ideally, banks do not press foreclosure for when you default one EMI payment. However, if you continue to default consecutive payments, for instance, till 3 months then there is an increasing probability that the bank will seize your assets.

As per RBI guidelines, a mortgage default occurs when a borrower is 90 days or more behind in making a payment on their home loan.

Repercussions of a Mortgage Default

In such scenarios, legislation called SARFARESI comes into the picture. SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act) lays down a detailed framework by which the secured creditors can insulate assets, seize and sell the mortgaged property to recover the pending loan amount.

Pragmatically, the banks only resort to this if there is no other viable alternative. Since banks are not in the business of properties, their propensity too is to try and resolve the issue without taking such severe measures.

Impact on Credit Score

Your default on home loan will get reported just like CIBIL. This leads to a negative impact wherein your credit score is adversely affected. This further impacts your ability to avail any credit facility from the financial system.

What are your Options:

• Grace Period

You can request the bank to grant you a grace period stating that you have previously paid your loans on time but are unable to pay now due to a sudden situation like job loss, temporary illness, etc. An effective statement and presentation of documents might prove advantageous and the bank might consider a grace period with some penalty.

• Cash Crunch

If you have substantial investments in mutual funds, fixed bank deposits or other sources of immediate cash, you can consider liquidating these and pay off the bank.

• Loan Restructuring

If you feel that the problem is only temporary and it will resolve over time you can ask the bank to restructure your loan. Again, it is imperative that you provide relevant documents and prove your case to the bank that you are a genuine borrower and that you will be able to pay the loan if a restructuring is done.

• Reduced EMI with Partial Payments

In cases where your income has fallen or the EMI rates have hiked and you are unable to meet them, you can request the bank to reduce the EMI amount meanwhile extending the tenure. This is more likely to work if you are young and the loan doesn’t already extend to the retirement age.

• Disposing of the Property Yourself

To ensure the maximum price possible it is advisable to sell the property yourself and cooperate with the bank after you have exhausted all the other options. In case, after selling the property, you are still left with a good amount, it can come in handy for your personal use.

Are you looking to Improve your LOW CIBIL SCORE? Contact us

In order to own a home, many adults resort to taking loans since, more often than not, it is the only feasible option. This lending process is an extensive one and involves filling out an intimidating stack of paperwork, which must be done. This lending process is accompanied by a necessary background check, as lenders need to ensure that the borrowers are qualified and genuine applicants.

Since the appraisal of a home loan is a multi-tiered process, it can be a daunting task for first-time applicants. This is why it is important for applicants to understand the various parameters involved in a background check to avoid disapproval and non-eligibility.

Meanwhile, financial institutions should undergo a thorough legal and technical check to prevent fraud and consequent losses caused by non-payment of bills by phony applicants.

There is an array of mortgage loans that people can apply for, depending on their circumstances and privileges. But while the type of loan may differ, it is imperative for all applicants to submit to a background check. The degree and extent of the background check are determined by the type of loan being applied for. Someone applying for a gigantic loan will, needless to say, have to undergo a more severe and meticulous screening process than someone applying for a smaller amount.

CREDIT HISTORY
“To determine how financially reliable the applicant is, the loan companies will examine all of the applicant’s credit history, the amount of debt they have, the current bills, previous loans, history of paying bills on time, number of open accounts, credit score, etc. This credit history determines the amount of interest and the applicant’s eligibility for the loan.”

TOP CHECKS FOR CONDUCTING BACKGROUND VERIFICATION

IDENTITY VERIFICATION:
The probability of identity fraud is unfortunately quite high in India. About 85% of identity frauds are related to auto loans, credit cards, and mortgages. Lately, mortgage loans have witnessed a surge in identity theft. It is therefore imperative that lenders conduct thorough and extensive background checks to prevent such dismal scenarios. Voter ID check, Aadhar card check, Passport verification, and Driving License check are among the verification processes that should be carried out.

EMPLOYMENT VERIFICATION:
Lenders probe and verify the applicant’s job status, which should be satisfactory and the same as claimed by the lender. This information is crucial and is considered with the applicant’s credit history to determine their chances of availing a loan.

EDUCATION VERIFICATION:
It’s rather common for applicants to produce fake documents in India in order to avail loans. One of the best ways to conduct thorough checks is to utilize an extensive multi-layered database. This should include verification of the various courses, certificates, institutes, years, and other pertinent information.

ADDRESS VERIFICATION:
In case of any default or irregularity, the physical location is the go-to place for the financial institutions and lenders to look at. This is why physical address makes for a very significant, pivotal component of the verification process. It is important to verify that the address of the document matches the actual physical address of the applicant and the duration the resident has been living there, among other things.

POLICE VERIFICATION & CRIMINAL RECORDS CHECK
Public databases, along with lists maintained by various police departments, need to be scrutinized to ensure that the applicant does not have any prior criminal history.

REFERENCE CHECK
Time must be taken out to do a valid reference check, despite it being a tedious, time-consuming process. This information is crucial to do a thorough background check.

Frequently Asked Questions

1. Why is background verification necessary for loan applicants?

Background verification is a critical step for lenders to ensure that applicants are genuine and financially reliable. It helps financial institutions mitigate risks, prevent fraud, and avoid losses caused by non-payment or “phony” applicants.

2. Which documents are typically used for identity verification in India?

To combat the high rate of identity fraud, lenders typically verify official government-issued documents. These include the Aadhaar card, Voter ID, Passport, and Driving License.

3. How does my credit history impact my loan application?

Lenders examine your credit history, including existing debts, payment consistency, and credit score, to determine your financial reliability. This history directly influences your eligibility for the loan and the interest rate you will be offered.

4. Why do lenders perform a physical address verification?

Physical address verification is pivotal because, in the event of a payment default or irregularity, the lender needs a confirmed location to reach the borrower. Lenders often verify that the address on the documents matches the actual residence and check how long the applicant has lived there.

5. Is education verification really necessary for a financial loan?

Yes. In India, it is unfortunately common for some applicants to produce fake educational documents to bolster their perceived profile. Lenders use multi-layered databases to verify certificates, institutions, and years of study to ensure all provided information is truthful.

6. What is involved in a criminal record check?

Lenders scrutinize public databases and records maintained by various police departments. This ensures the applicant has no prior criminal history, which helps the bank assess the moral and legal risk of lending to that individual.

7. Does the intensity of the background check vary by loan type?

Yes. The degree and extent of the screening are usually determined by the loan amount and type. For instance, an applicant seeking a large mortgage will undergo a much more meticulous and severe screening process compared to someone applying for a small, short-term loan.

8. What role do reference checks play in the verification process?

While time-consuming, reference checks provide a qualitative layer to the verification. Speaking with references helps lenders cross-verify the applicant’s character and the claims made in their application, providing a more holistic view of the borrower.