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Late payment: An old parasitic business practice
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Bikky Khosla | 17 Jan, 2012
Late payment has always remained a ball and chain to the Indian small and medium enterprise sector's growth. Most SMEs' cash flow can hardly withstand the burden of late payments but still these firms usually extend credit in the form of delayed payment. They can't help but do that. It has become a way of doing business. Saying a "no" means losing a customer for ever.
It's beyond doubt that extending credit to customers is an aid to selling. But by contrast, there is also an inevitable element of risk that one will not be paid on time. In fact, late payments have always continued on a grand scale, with thousands of SMEs hamstrung by them -- every day. And surprisingly, it is the big boys -- the larger companies -- whom most SMEs always try to treasure as customers -- that are the worst offenders.
What can a small firm do to respond to this lingering problem? I think a simple but meaningful action can help a lot: create a smart credit policy for your business. It will not only reduce the risk of bad debts but also help manage your largest asset -- the debtors. While promoting prompt payment and cash flow, a well-defined credit policy can also help prevent your relationship with many of your customers from going sour.
A small firm -- before it ever considers granting credit to a customer -- small or big -- should make sure that it has a credit policy, which clearly states all important credit terms and conditions, including the basics, such as the terms of sales, discount rates and discount periods it is willing to offer, how it calculates interest rates, whether it reports payment behaviours to credit reporting agencies and so on.
Apart from that, a credit policy should also address other aspects of a transaction, such as late fines, remedies if a customer fails to pay the debt, venue and jurisdiction for legal action, delivery obligations, maximum time allotted for merchandize inspection, etc. In addition, an effective invoicing system and a bad debt collection policy should be closely tied to the credit policy.
Also, the government can play a significant role here to help the SME sector -- the backbone of our economy -- get rid of the burden of chasing overdue invoices. We should have stricter regulations against such parasitic business practices. Industry associations should also come forward to address this issue.
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SEE ALSO
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MSMED ACT 2006
saurendra rautray | Mon Sep 5 18:27:08 2016
The delayed payment issue is some what curable with the help of the new act MSMED act 2006 read with Arbitration Act 1996. One needs to get a good lawyer who understand both the law well enough. I would suggest all the existing SSI units to avail such beneficial law for the payment cancer.
Regards
Saurendra Rautray
Rautray & Co
New Delhi
www.rautray.com
09437008255
Pailan Group Defaulter
Asha Communication | Sat May 24 03:29:04 2014
Pailan Group is not paying an amount of Rs.1.20 crore since last March 2013. My company is suffering lots and paying bank interest and becoming sick company. Pl tell me how to recover this amount.
sr yadav | Tue Mar 26 15:05:04 2013
I thin SME should form association and like RBI displays list of defaulters, SMEs asso should also give details of such defaulters and request all SMEs to stop all business dealings with that party.
SMEs payment woes
R K Bhatia | Mon Jan 7 16:04:39 2013
Govt should enact law for making payment as per credit period - default should be punishable with penalty. SMEs should form association and publish list of companies not making the timely payment. This list should be on lines of RBI defaulters list and all SMEs should boycott such companie.
Big cos pretend
Rajesh Jha | Tue Aug 14 09:50:50 2012
Big companies pretend that late payment by them is due to their internal regulatory requirement. Bill is to be passed by and through many departments.This is just to make fool of small firms.
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Re: Big cos pretend
Saurendra | Mon Sep 5 18:28:00 2016
Take the shelter of MSMED Act 2006 for recovering your dues.
Regards
Saurendra Rautray
Rautray & Co
New Delhi
www.rautray.com
09437008255
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Re: Re: Big cos pretend
Raju | Fri Aug 11 18:55:21 2017
Dear Sir, This act is without Limbs, even if the arbitration council passes decision in your favour the big companies will not pay and drag that to district and other courts. It is a hassle for all small industries.
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Which firms provide ratings
Nitesh | Fri Apr 13 09:23:54 2012
It is a good article ,can u plz let us know which companies offer credit ratings for SMEs.
Can you send a credit policy format
Srinivasan Iyer | Thu Feb 9 01:26:03 2012
Great article.
Can you send all your subscribers with a standard credit policy - we SMEs can use this as a template and then modify it to suit our businesses.
Thanks.
late payment a automatic solution
Ashwin | Sun Feb 5 06:52:33 2012
Everyone uses computers to make payments now. Make it compulsory for the software to automatically calculate interest from date of invoice to date of delayed payment and that should be the amount paid to the supplier. this is especially necessary in case of govt bodies who as everyone mentions and agrees is the biggest defaulter for delayed payments.
Standard credit period of 30 days is provided to the customer to ensure receipt, inspection, paperwork, internal system up-gradation etc etc etc, so why do we have to follow up regarding status of terms like GRNS, SRV, SR Note, etc we are to concentrate only on payment receipt, customers internal procedure is not our concern. Any documentation or quality issue should immediately communicated to the supplier within 10-15 days. Not when the supplier calls up for payment.
it is important to make it mandatory 30 days from Invoice. No other terms after receipt and acceptance etc should be allowed. Make it compulsory to make this a standard payment term so that there is no question of deviation from supplier while offering quotes. If supplier wants advance or some other payment terms the cost should be loaded.
Make cheque bouncing a criminal offense
Tushar | Wed Jan 25 05:57:17 2012
Make the cheque bouncing a criminal offense and enforce law strictly. Bring it under EOW. A cheque is a negotiable instrument in lieu of bank notes only to facilitate transactions. Let the banks treat the cheque as a Bank Note. Let the cheques have a denomination printed on them like demand drafts which the banks issue after having equivalent deposits of account holder with them. Other way is that suppliers start asking bank guarantees from their Buyer's. After all we open LC's also for import export businesses. Why can't we have a similar system for domestic business also.
sikka | Wed Jan 25 05:17:22 2012
even having taken a cheque carry no meaning
Have to do something
Prasad | Wed Jan 25 04:58:37 2012
Thanks for sharing the story ! But ultimately what is the result, we have to do something for this.
We must change the attitude
Abhijit Guha | Sat Jan 21 14:50:11 2012
Thanks to the Editor. We the Business owner small or Medium sector, I think should change our attitude--Definitely Customers are our GOD but at the same time please close the eyes and think that a Factory without a VENDOR ONE WEEK-- so it is a both side traffic.We should focus our Business not anything else. We have to monitor the debtors days or else we are digging our own grave by paying huge interest to Bank. We should be focusing the service in terms of quality not in terms of credit days.
Thanks for the story (see also) based on our views
J. Akins (UK) | Sat Jan 21 04:29:58 2012
Thanks for the story (see also) based on our views. Hope you will continue voice for SMBs.
late payment
ME | Fri Jan 20 16:16:20 2012
logon ki niayt kharab ho gai hai oor payment
marte ha.
Late payments
SP | Fri Jan 20 16:09:43 2012
Big companies are using the funds of SME by deliberately delaying the payments and saving own bank interest.
Late payments
allan_dsiyza1@rediffmail.com | Fri Jan 20 01:36:10 2012
just dues just debts = these go hand in hand
Govt biggest defaulter
B. B. Sao | Thu Jan 19 14:02:57 2012
You are asking for Govt. to help, but govt. is the biggest defaulter & you can't do anything about it. If any one has any idea of recovering dues from govt. please let me know
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Re: Govt biggest defaulter
Saurendra | Mon Sep 5 18:29:50 2016
Dear Sir, If you are a registered SSI Unit with EM-2 certification we could help you in recovering dues from Govt institutions. Regards Saurendra Rautray Rautray & Co New Delhi.
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SMEs suffer due to lack of cash flow
Sharbani | Thu Jan 19 12:32:11 2012
I agree to this. It is mostly the small vendors who suffer due to lack of cash flow. The buyers try to squeeze discounts from you as they know we need the money for our day to day operations. There should be a governing body like the consumer forum where vendors can get quick recourse.
There should be a credit rating forum so that the vendors can check the credit rating of the buyers before starting business.
UK SMEs facing same problem
J. Akins (UK) | Thu Jan 19 09:21:39 2012
Here in the UK, we are facing the same problem. According to recently-published figures from Bacs, 861,000 small business firms are facing this problem. They are forced to wait 28 days more than the specified terms to get their payments.
SME credit policy
satish chandra | Thu Jan 19 06:46:46 2012
The editorial is correct in all aspects except in one assumption that there is a redressal against willful defaulters. There are many instances where buyers openly refuse to clear payments and ask SME suppliers to take whatever legal action to be taken. They even knowingly bounce cheques and mention that supplier can approach courts if they dare, since they are sure that they can subvert the present legal systems for years on end and the SME cannot afford the time and cost factors to pursue the legal option. Government can help in a small way by creating a credit rating database of such defaulters which should be linked to the financial institution lending demerits for such companies.
For a a strict legislation
VIJAYAN NAIR | Thu Jan 19 05:09:33 2012
If the Govt is serious to help MSMEs, a strict legislation should be made to get payments in time and wherever payments are delayed more than 45 days, Govt. should ask the defaulter to pay immediately. Even Govt. depts fail to pay to MSMEs due to lack of funds at their disposal.
An indirect harassment
Nitin Saini | Wed Jan 18 18:19:02 2012
This is a culture followed all over world by buyer.
Companies do run for ISO 9001, 14001 etc certification in order to get orders but when they have to pay to their suppliers they just turn their backs. ... They take order by showing that they take good care of their employees with such certifications but poor supplier is not able to take of its employees due to late payments, especially SMEs. This is actually an indirect harassment, which one is not doing to their employees but to someone.
So while auditing for ISO certifications, payment accounting should also be audited and given them rating like ISO 9001:2008 AA, example
AA: payment on time with bank transfers
A: payment on time on collection basis
B: payment released but with max 1 month delay
C: payment always delayed with more than 1 month time
etc etc
... and further I do not need to explain.
Once this trend starts, then rotation itself will start and no buyer will say that he has not got payment from his buyer so he is unable to do.
What you say all about this ...
Help to recover debt
Sudhanva Patankar | Wed Jan 18 18:13:52 2012
One of our very old overseas clients became over ambitious and placed tall orders for Rotational Molding Machinery & Moulds 3 years back. Since the products are bulky, we could not hold them back for payment. Now he is a great defaulter. The amount we have to recover from him is more than our last 10 years profit. How can we recover the debts from the overseas client?
Client refuses to agree to any policy for payment
S K Agrawal | Wed Jan 18 18:03:45 2012
Though it is very vexed issue, it is easier said than done. I have experienced recently. The client has, as matter of policy, delayed payments to 90-120 days which were due after 30 days. Earlier they use to give 30 days PDC but stopped giving after we presented the PDC after say 60 days.
Recently, we insisted payment against delivery with the result that even ordered
goods have not been lifted and there are no further transactions. Client has refused to agree to any policy for payment.
Any tips... anyone??
R.W. | Wed Jan 18 18:01:52 2012
Very good topic and well addressed. Read all comments regarding this issue but don't see anyone with some success on this issue. Any tips... anyone??
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Re: Any tips... anyone??
Kunal | Tue Jan 24 08:51:09 2012
If your product requires servicing or maintenance , then you can refuse to deploy your service personnel to the defaulting company until the balance payment is cleared by them. I assure you , it works.
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Credit Rating by Vendors
N. Maheshwari | Wed Jan 18 15:54:56 2012
Why not a credit rating standard of be set either by any SME's interest bearing forum or any Third Party. A WEBSITE should be maintained and should be updated by vendors about the credit history of companies giving relevant references to maximize flawless information.
Once the information is updated which could take some time (as done by CIBIL) buyers who are duping vendors by not paying for the services or goods or delaying payments up to 6-12months or more other vendors will think twice before dealing with such companies. The information provided could be charged even. In long run the companies will also take care about their ratings and would lessen this problem of SME's to an extent.
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Re: Credit Rating by Vendors
Tushar | Wed Jan 25 06:05:06 2012
Only problem is that no one will share their buyer's details. We have a strong population base. More hungry people out their. This is what the bigger companies take advantage of.
The policy of procurement departments of all companies is very clear. 1. get discounts of minimum 20% on quotes. Then after supply hold back another 20% minimum to keep the vendor at this toes. If he resists or protests, find out another one willing who probably is the old one's neighbour. And this chain continue.
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SME woes
Vinayak | Wed Jan 18 15:05:48 2012
Culprits are the bigger companies who want to wipe out potential SME threats by overlooking due payments with the existing customer.
Overdue problem
Vinayak | Wed Jan 18 15:02:31 2012
Agree that there should be stricter legislation against companies who play with others money , effected particularly are SME's who have limited cash flow and limited bank support.
Credit Policy
anand305@gmail.com | Wed Jan 18 14:48:47 2012
SME can use trade policy of 3 times 100% advance payment, from 4th time 50% advance and 50% credit. In case of credit, bank interest should be applied @ 18% per annum.
Avoiding of late Payments
Jayasimha | Wed Jan 18 14:14:53 2012
As this is is a democratic country until & unless some strict regulatory laws is imposed on the Buyers this problem will not be solved. Hence a strict rule should be imposed on Buyers to pay the payments in time
Factoring a solution
Andrew T Gale | Wed Jan 18 14:14:51 2012
This is an excellent article and gives good advice as well. Another way of giving a bit more "Muscle" to a small business dealing with a large organisation is to consider "Factoring" the invoices with them. Although there is a cost involved a large business is less likely to default on payment terms with "Factor" who is usually a large bank!
It is also important to try and develop a personal contact with the Chief Exec of large clients. A word from them will often get the "bean counters" below to jump a bit.
keep up the good work with articles such as this.
Kind regards
Andrew T Gale
A discouraging factor
Bhaven | Wed Jan 18 13:33:32 2012
I have joined chemicals distribution business since past 3 years..and i don't see many people of my age getting into their family business or starting their own business..they prefer to work in MNCs or large corporates..only reason being..their fathers never encourage them to enter such business..where most of their time n energy is spent on recovering money..yes..that consumes 25% of our valuable time..generation next dosn't want to get wasted in such manner..actually this problem is the biggest discouraging factor to enter a trading business..
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Right
Abhishek | Wed Jan 25 06:36:08 2012
I'm agree with you
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The raw nerve touched
Gadhadar | Wed Jan 18 13:21:32 2012
You have touched the raw nerve,taking on the subject. It is like who will bell the cat?
We are all aware of the problem & solution
Rajender Nagpal | Wed Jan 18 13:21:30 2012
All the comments shows that we are all aware of the problem & solution. Make yourself strong enough to deal with such buyers. If we all make a promise to ourselves that we will never sell to the customer violating the payment terms & will not bother of loosing business, in the long term this will be good for all. We are all in trouble because we are thinking of today only & not the full life of our business.But MUST NOTE WE ALL NOT 5% OR 10%. Then only this problem can be solved.Otherwise whatever we think/ write is all A waste.
Model credit policy
Omprakash N M alu.(Samruddhi) | Wed Jan 18 11:29:37 2012
You have raised very important issue of SME sector. it had been long paining problem. Tradeindia should provide various policy and agreement format and various online tool which is useful to SMEs.
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Re: Model credit policy
Sudhanva Patankar | Wed Jan 18 18:17:35 2012
Thanks for the prompt reply. We shall follow your guide lines in the matter. We shall forward to you details of the buyer tomorrow & the amount he has swindled.
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Late Payment
Mahendra | Wed Jan 18 11:12:01 2012
You have rightly written on the subject, we often feel we are being used by the big buyers/industries, when a quotation is given and order received on that behalf with all conditions mentioned. Payment is most of the time delayed due to various reasons, and we small and medium suppliers are always worried of losing the customers if we protest against. It is also a fact that the suppliers are not united, they think the other is a competitor, which should not be. A merchant should know that we all are sailing in the same boat, if we are cooperative with our fellow supplier, we can reduce this menace.
It's an unwanted necessity
Manish | Wed Jan 18 11:11:09 2012
"Unwanted necessity" is how its is. The position is such "If i refuse credit terms some other & that too a SME seller would agree too it"!!!
.Practical approach as per me when seller has honored his part of promises is base your decision on factors such as: -
1/ Collect market feedback, before supplying to a new customer.
2/ Ask for mandatory part advance/ on delivery payment. Believe you me you wouldn’t regret as only you would be at receiving end of quality and serious orders to service, for a change.
3/ Expand customer base.
4/ While serving be very very nice to your customers so that they miss you when not dealing with you.
Follow your gut-feel, earned by years of experience &….
It would be welcome of members to can share their methodology, to follow them as "best practice"
Solution for delayed payments especially by big firms?
Sanjay | Wed Jan 18 10:37:51 2012
Hope regulators address this very issue due to which a lot many SME goes into oblivion. Systems like bill discounting, recourse to authority for speedier justice from defaulters are required. None of these big companies take a chance in delaying there payments to banks and other stronger institutions then why SMEs, since they know that the SME cannot approach anybody for faster resolution. Hope soon some steps are taken to avoid the problem before it breaks the spirit of entrepreneurship.
Responsibility of bank
Sumit Kumar Goel | Wed Jan 18 09:11:52 2012
Cheque issued by any organization must be a responsibility of bank.
Late payment by companies in India and Sri Lanka
Atula Siriwardane | Wed Jan 18 08:58:01 2012
As a freelance artist I have suffer from late payment by companies in India and Sri Lanka which made me discouraged working for companies of these countries.
I think that too is a common problem, and it definitely affects the SMEs too in the long run.
The tragedy is most of the times I feel that it is not because they can't pay. For some reason they purposely delay.
Can you analyze this problem too.
Delay in payment well beyond payment terms a pain
Indranath | Wed Jan 18 08:46:00 2012
I think there are 2 issues here. One is where consciously I as an SME am extending credit to pick up business. This is still ok. But what is painful is the actual delay in payment well beyond the payment terms. I this that is what kills all the working capital planning I do as an SME. Any recourse on delayed payment will be helpful.
Cultural flaw
Maxima Business Solutions | Wed Jan 18 08:34:57 2012
I think it has become a habit due to a cultural flaw. "Sab chalta hai" mentality. And a mentality of not wanting to pay anyone at all for their hard work & service.
Late payment from also the fellow sheep from our own herd
Amolkumar Sail | Wed Jan 18 08:09:50 2012
More than anything else, our government (Industrial policy department) can play a very crucial role in this and by all-means it should give attention to this issue and further strengthen the existing laws or enactments. Now, not only big concerns are a matter of concern for late payment but also the fellow sheep (other SME's) from our own herd; default on payment and sometimes totally cheat on payments, and the SME on other end of the transaction; cant do much about it, but wait and send reminders. Maybe a separate prosecution court is needed for such issues.
Big companies exploiting micro, small firms
ULHAS VAJRE | Wed Jan 18 07:48:39 2012
Yes. Many a times the big companies and corporates are exploiting the micro and small businesses by deploying these delayed payment tactics. I am a service provider and have always been at the receiving end, because when it comes to services, they are required on very urgent basis, but once the services are rendered the urgency of the client is over and for payments we have to run from pillar to post for months together and suffer financially, mentally and physically. Why the concerned authorities don't enact laws for speedy payments? At least for micro and small industries/service providers, the client must make payments within a fortnight only...! Thanks for this article.
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Re: Big companies exploiting micro, small firms
Sumit KumaR goel | Wed Jan 18 09:13:15 2012
Very right
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For a bill discounting system
Jayant | Wed Jan 18 07:48:02 2012
The government should make available an easy to use bill discounting system specifically for SMEs, for all approved bills. In fact, there should be a compulsory provision for this so that another SME does not waive off the discounting clause. This way, the SME can get its payment in time & any delay will be between the buyer & the bank.
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Re: For a bill discounting system
Sanjay Patil | Wed Jan 18 14:27:15 2012
This system will help a lot
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Big problem brought to forefront
Pankaj Hans | Wed Jan 18 07:26:49 2012
Wow! Some guts to even bring this problem to the forefront.Today No SME can afford this menace of Late Payment, but cannot do anything about it.
Late payments a real international plague
I. ASCHER ISRAEL | Wed Jan 18 07:21:25 2012
I would like only to stress a few remarks 1) late payment is not only an Indian feature; it is an international endemic 2)a credit policy is only a partial solution since it compels an artificial increase of product prices 3) your solutions(late fines,legal action) should not be the only remedies ; 4)an international initiative should be taken within the context of world trade organisations in order to install a legal code of conduct in this matter to be strictly applied by government administrative authorities ....but the question remains : what if the country itself encourages this plague because it is the first body not to respect payment deadlines?
Competitor giving prolong credit - what to do!
Harish Purohit | Wed Jan 18 06:54:25 2012
Dear sir,
what one should do if one of competitor party is giving credit so long that profit goes into interest. How one can stand in the market and grow their sale yearly 10%.
Please note the competitor is giving prolong credit and no inquiries even after due period.
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Re: Competitor giving prolong credit - what to do!
Pay Back | Sun Feb 12 18:41:06 2012
Start doing business with him, then delay payment and put him out of business.
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Big boys have to change their attitude
Tiruchirapally Srinivasan Saibaba | Wed Jan 18 06:39:27 2012
The editorial is right in saying "The Big boys are the worst offenders" No matter whatever the terms you prescribe in your terms of contract, it is always sidelined, and the SMEs will not be in a position to fight out in the courts of law because of time and money involved. The big boys have to change their attitude and fix the norms to themselves in the larger interest of the society.
Most of the purchasers attitude is that yours is mine and mines remain with me. The big boys should not build castles on the graves of the SMEs.
Is there any law helping SMEs for recovering payments
Amit Zaveri. | Wed Jan 18 06:00:38 2012
Dear sir, is there any law helping SME & tiny Manufacturer for recovering payments ? if it is not payed beyond credit limit ? What is the maximum time, a corporate company can withhold the payment ?
if all paper woks are completed & problem is at corporate end, how much time he can hold the payment ? Please guide me.
I am tiny manufacturer facing this problem my contact number is 09821475951. your guidance will help me a lot.
Amit Zaveri,
Amit Electronics C-708 Pavanputra chs,
Ashokvan, Shiv Vallabh Road,
Dahisar East, Mumbai - 68
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Delayed Payment Act, 1998
Expert Team | Wed Jan 18 07:18:05 2012
Delayed Payment Act, 1998 to Small Scale and Ancillary Industrial Undertakings: The existing provisions of this act were strengthened with the enactment of the Micro, Small and Medium Enterprises Development (MSMED) Act 2006.
As per this act, banks have been advised to sanction separate sub-limits within the overall limits sanctioned to the corporate borrowers for meeting payment obligations in respect of purchases from MSME sector. Necessary instructions have been issued by banks to their branches to monitor the position of payment by corporates to MSME and wherever found necessary, persuade the corporate to release the same on priority basis.
But while banks have been advised to allocate a sub-limit in respect of large borrower accounts, for making payments to the MSE units against purchases from them, it is not possible for banks to force the large buyers to utilize the limit for making payments.
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Re: Is there any law helping SMEs for recovering payments
VIJAYAN NAIR | Thu Jan 19 05:22:21 2012
Dear Mr.Zaveri, although there is no law, under the MSMED Act,2006 payments to MSMEs should be released within 45 days maximum.This is however, not even followed by Govt. Cos.
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Affecting the SMEs
DELLUS JAMES | Wed Jan 18 05:33:26 2012
Late payment issue is very much affecting the SMEs. The Govt must solve this to play significant role in SME Sector.
Credit card type system will work
ANIL BHARGAVA | Wed Jan 18 05:31:24 2012
Government should regulate the late payment menace. All
transactions should be through credit card type system with in-built
credit period among the parties and where the credit period is not
mentioned. It should be fixed say 45 days by default. Bankers can be
roped in to give a collective system of operation of settling the
payment and the credit period.
It takes a few week to even months
K. Deshpande | Wed Jan 18 04:30:07 2012
This is a malady which is causing huge losses and several SME's are reeling under the burden of "Late Payment". The delays are usually attributed to long & complicated bill passing procedures, thereafter, there is the cheque preparation procedure, the cheque signing procedure and finally the cheque handing over procedure. In all this it takes a few week to even months to finally receive the payment. Recovering interest is another big obstacle and invariably, vendors tend to waive off the same in the interest of keeping their clients happy and maintaining long-term relations, which the clients do not fail to take undue advantage. Industry associations and such bodies need to play a proactive part in curbing this malady.
We need a regulator
Anil | Wed Jan 18 04:14:38 2012
This is very common with big companies. They use supplier money for their working capitals. A
very few companies can say that they pay SMEs or SSIs within 45 days. Most common excuse is did not receive bill . Bill is always send with delivery; nobody can send good without bill in transport. We need a full power regulator.
Ask to sign on a legal document, you are out of race!
A.V. Sundararajan | Wed Jan 18 04:09:04 2012
Let us be honest in facing this issue. The established meaning of business is "Cheating". Late payment in one of the corollaries of the main theorem. There are many.
If a vendor asks the customer to sign on a legal document, he is out of the race. But, a vendor has to sign Non Disclosure Agreement. If he even asks for some clarifications, he is out of the race.
It is a national shame that NDA of most of the MNCs carry a clause that any legal disputes in their country. For the supply of a few thousand rupees, SMEs are signing such ridiculous documents.
Our Govt. is totally oblivious to any such subjugation the citizens are put to.
Believe me !! We are a free country and liberated from the slavery of the British !!!!!!!!!!!!
We need SME certificate issuing body
V. Murali | Wed Jan 18 04:06:31 2012
What you mentioned is 100%correct. This is the root cause for non repayment of bank loans. To overcome this problem, SME certificate issuing body should have a power to closely monitor companies and conduct audit at frequent intervals, and issue NOC.
Credit rating on 'big boys', based on payment history to SMEs
RAM KUMAR P | Wed Jan 18 03:37:27 2012
There should be an industry ombudsman which should provide credit rating on the so called 'big boys', based on payment history to SMEs. This will help SME to make a proper credit policy.
Credit policy - this is the only way
Michael Herrett | Wed Jan 18 03:31:16 2012
As a small business we always spend time chasing money but we have introduced a credit policy and now most of our outstanding invoice are paid within 30 days or we put them on Stop Credit, if this does not work we do not give them credit in the future and make pay on delivery. This is the only way.
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Credit policy only possible when...
sanjay patil | Wed Jan 18 14:34:46 2012
This is only possible for special product were there is no competitor or few competitor
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Govt. departments are just like 'big boys'
Gopal Tantia | Wed Jan 18 03:14:34 2012
Another big problem is refund by different govt. departments. It also takes very very long time. They never say "no" but will point out unnecessary things which can be overlooked or corrected.
Everybody taking advantage of lethargic legal system
Joher Madraswala | Wed Jan 18 02:55:09 2012
I am in trading business and the problem of late payments is big hindrance in expanding my business. Everybody in our country is taking advantage of our lethargic legal system which has aided corruption & illegal practices. Our Prime Minister will do yeoman service to the nation if he takes up a single point agenda of improving & strengthening our legal services so that it will have huge impact in the economic well being of our nation.
This is part of the deeper malaise
Prof. Sitesh Dutt | Wed Jan 18 02:54:00 2012
What's the basic issue? Lack of discipline and a desire to flout laid-down rules.This is part of the deeper malaise afflicting today's India.The law can be transgressed with impunity.
Look at our illustrious leaders. No law applies to them! What is
the solution? Implement the laws. Make it clear that you are prepared
to lose customers who extend their credit terms.......and have the
GUTS to do it! Simple isn't it? Now do it.
Make mandatory for receiver of goods to clear VAT
A P Thomas | Wed Jan 18 02:09:21 2012
When a company submits an invoice along with the delivery of goods, the supplier is liable to pay to the government the VAT amount shown on the Invoice within the stipulated time; however if the billed amount along with the VAT is not received by the supplier, the burden of paying the VAT to the govt lies on the supplier, who has already spent money to manufacture/ procure the goods. In such cases, it should be made mandatory for the receiver of the goods to clear the VAT amount directly to the govt, since he has not cleared the bill and additional burden is imposed on the supplier.
Excellent article -- SMEs are more honest
ctkuan@cosmos-na.com | Wed Jan 18 01:25:19 2012
Excellent article.
The fundamental principle is to treat equally small and big customers. You will discover in the long run that it is the small customer who is the more honest.
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Must have some govt regulation
bavejapk@hotmail.com | Wed Jan 18 07:27:59 2012
We must have some govt regulation for big customer to make timely payment to SMEs
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Re: Excellent article -- SMEs are more honest
S.Deshmukh | Wed Jan 18 08:16:38 2012
Yes SMEs are more honest in this case. I want to share my experience. One company provides me some not-salable material without order & high rate & now trying to recover through legally. In this situation how can I face it. Please guide.�
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It's a good thing that I charged him twice...
Gregory B. Holman, R.T., DINY, Inc. | Tue Jan 17 19:22:33 2012
Build the interest for the late payment (payable term) into the sale price. And interest should be a function of credit worthiness. Also, late fees must be stated in advance.
An old saying: "It's a good thing that I charged him twice what that thing was worth, because I only got half the money anyway."
And as far as government intervention/regulation, forget about it!
Time spent to get paid is rarely worth it, and legal charges only make the lawyers rich.
With alternate customers available, one gets the strength to enforce payment discipline
S.R.RAMA SUBBAIAH | Tue Jan 17 18:15:24 2012
In every company, doing business & earning profits at others' expense has become the norm with the result Purchase & Finance departments excel each other in fleecing the vendors. Efficiency of Purchase consists in bargaining the lowest price for the best quality with the quickest delivery while the rating of Finance gets excellent if they could delay making payments to the maximum extent & also looking for any sort of loopholes for deductions. Thus the vendors have the perennial problem of cash flow, with banks also not coming to their timely rescue. The solution consists only in broad basing the customer-list wide enough instead of depending for business only on a limited few who are only out to constantly exploit them. With alternate customers available, one gets the strength to enforce payment discipline.
Need large SME forum with "Big Boys"
Vijay Jassal | Tue Jan 17 17:34:05 2012
A very valid discussion in current times especially when SME is finding the balance of payments badly tilted in the favour of customers. I guess the issue cannot be resolved by an SME making an internal credit policy alone, we do it and mostly fail and have to sign off exceptions else lost business to a new and enterprising SME (who unfortunately is walking into the troubled waters with open eyes). But probably what can help if the issue is taken up by a larger SME forum with "Big Boys" and persuade them to act as "Elder Brothers" too!
Excellent article TradeIndia
Visitor | Tue Jan 17 17:25:15 2012
Excellent article TradeIndia, no one wants to talk about this. It has become a sort of tradition, and something to be expected. That has to change.
A govt system to penalize defaulters
prashantbane@gmail.com | Tue Jan 17 15:48:30 2012
Yes , government should form a system wherein any corporate, firms
defaulting the payments as per promised time-lines should be
penalized. Also there should be a forum under which SME's can
highlight such companies under negative list. Giving credit is not
the only thing which promises business. If Indian government has
credit sanction norms for SMEs , then why not for corporate
credibility?
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Re: A govt system to penalize defaulters
P.Ravindran | Wed Jan 25 05:23:29 2012
Govt should come out with strict rules against defaulters and speedy trials of such cases in court and settlement within a stipulated period should be made.Defaulting customers name be notified to suppliers.
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