msafiri 36 Q Mr Peter Kahi is a Director in Restructuring and Forencic. For further information contact him on pkahi@ kpmg. co. ke Tel: + 254– 20- 2806000/ 207 KPMG Kenya is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. With 123,000 people worldwide, member firms provide audit, tax and advisory services from 717 cities in 145 countries. The views and opinions are those of the author and do not necessarily represent the views and opinions of KPMG Debt collection efficiency p romotion 123 It is not the end figure that matters most but rather the initial components/ constituents of the debt, emanating from the order, the supply/ delivery, quality/ quantity, the terms, the invoicing, etc. The following are some of the types of debts but the list could be longer: n Charged/ secured debts – giving rise to debts subject to debentures/ charges; n Pre- fixed price/ with order debt – giving rise to an agreed debt/ terms; n Negotiable price/ with order debt – giving room to unsatisfied quest for further reductions; n Pre- determined quality/ variation debt – giving rise to quality and time ethical disputes; n Interest charge option – giving rise to unpaid charged interest negotiable or otherwise – compromise option; n Delayed performance debts – arising from n Post- dated cheque transaction debts – purported/ perceived/ dishonoured or honoured/ presented or unpresented. Delay in debt settlement may be attributed to some of the following facts: n Lack of funds by the debtor – which if/ when detected can give rise to schemes of arrangement for settlement; n Laxity/ change of personnel – creating delays in follow- ups/ lack of coordination; n Faulty systems – accounting management failures – mechanical/ manual; n Unresolved disputes – based on a variety of reasons from pre- to post- creation of the debt; n Personal inclinations – where certain debts are collectable by specific people – director; n Omission and commission debts – where amounts are subject to certain regulations eg VAT and Withholding tax – charged/ not paid – irregularly; n Designed fraudulent debts – inter- company/ party – where companies create debts with sister companies/ individuals with ill motives or for contra/ otherwise. Before the collection can be initiated, the basic initiatives can broadly be categorised into the following: n Technicality – dealing with the extraction/ verification of the data: n Authority and origin of the debt/ terms n properly signed and stamped orders / letters of authority; n invoice/ signed delivery note – properly signed, stamped and authorised; n Contractual or engagement letter n contractual terms defined and signed by both parties. n Tactility – determining whether the delay is caused by n Internal or n External circumstances. n Methodology – determine the mode of approach: n Personal; n Analytical/ soft; n Repossession; n Collection agent; n Legal; n Arbitration. The phrasing of the desired communiqué will be determined by the mode of approach applicable with appropriate conclusive suggestions. Certified true copies of the requisite documents should always be made available as proof. disputed time/ performance – pre determined or otherwise; n Reversionary debts – ( especially on assets) where debts are created subject to payment/ right of ownership; n Politically instigated debts – especially in banking institutions or general suppliers; n Contra transaction created debts – non- cash or cash- changing transactions; n Deferred/ hire purchase transactions – retention of ownership conditionality; n Bills of exchange transactions ( local/ foreign) – credit rating/ unpaid/ discounted/ formalities; n Merchandising transactions – unpaid / uncollected / misappropriated / unaccounted for; n Deposit/ prepayment debts – mandatory / requested / interest bearing or otherwise; More often than not, companies are crippled by non- collection of debts for various reasons. This article is intended to analyse some of the general aspects which contribute to the origin of the debt collection phenomenon and give some tips ( in general terms) on how to approach the problem. This field is wide and perfect/ equitable solutions will depend on the personal practical ingenuity.
msafiri BUSINESS 124 After I have sorted out my area of activity, what do I do next? This is critical. Draw up a business plan before you do anything else. Don't listen to people who dismiss this essential step. Everybody who is in business has a business plan – some have it written out with charts and diagrams, some have it in their heads – but they all have business plans. Going into business without a business plan is like setting off in a ship without a destination in mind and with no maps or charts to guide you. Unless you have a clear business plan, you will never see the opportunities that abound. How do I put together a plan? Your business plan is your chart in the open ocean. You define your own destination and where possible, chart your own course, but make sure you follow your chart if you wish to reach your destination. Your business strategy is the master- plan of how to arrive at your destination. If the strategy does not work – for any number of reasons – you can change it, but your destination must not change. Make the plan as detailed as possible. For example, say you have decided that there is a big demand for private nursery schools in your town. You want to set one up and run it. Your plan must include all costs – rent for the premises, salaries for teachers, upgrading and fitting costs, meals for the children, insurance, transport, energy, water, rates and so on. This will provide you with basic expenditure. How much can you afford to charge per child? How many children can you enrol without sacrificing quality and safety? How many parents will be willing to pay for the facility? What are they paying now and what do they get for their money? The figures on your piece of paper will tell you immediately if your plan is workable or not. With all the information in front of you, you can juggle numbers to see how many children you need to enrol to make a profit, bearing in mind the additional costs incurred for each additional child. The figures show you what is feasible – in an ideal world. The reality may be more difficult or even better. Next, list all your resources. Your own experience and organising ability, cash savings, assets such as property, shares, bonds – or a rich father- in- law! How do I deal with customers? There are two sides to running a business. You can on one side be very neat and tidy, with a polished business plan, profit projections, targets and timelines. But the other side, the actual business, may be rather more messy – because it's real and people are involved! Ultimately, all business is about life and people – and part of the pleasure of doing business is to be able to deal with a diverse range of human beings! People, however, do not always behave in ways that you want or expect them to. They sometimes do the most astonishing things. So be ready for setbacks and don't expect anybody to be anywhere near as enthusiastic as you are about your project. Everybody has their own agenda and their own priorities – remember that each person, no matter how humble, is the star of his or her own life. Serve them and you cannot lose in business. One type of business may go out of fashion, or a better version may emerge, but if you learn to serve the person, you will always have a business. How do I sort out my finances? All businesses need financing. Even the street vendor who cooks his samosas at home needs to purchase the ingredients before he can cook them and sell them. Finance includes credit from suppliers as well as cash to pay workers and make ultimately, all business is about life and people... who may not always behave in ways that you want or expect them to