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Monday, June 16, 2014

Every business needs strict credit control

Credit control is often considered to be a complicated process in the world of finance, but once understood it becomes a valuable tool to ensure customers pay for products and services you provided in a timely manner. And whether your business is a large corporation, SME or start-up, credit control should be standard practice, as ensuring collection of money owed can be a significant factor in the overall success of the business as late payments affect cash flow and supply chain management.

What exactly is credit control?

Business credit control tips
An effective cash conversion cycle benefits business cash flow
In simple terms, credit control is when a business grants credit to customers with a good credit rating - meaning they pay their dues on time and in full. It can act as a mechanism to create customer loyalty and repeat business over the long term. Ideally every business should strive to establish a credit system with their customers, but it comes with high financial risks due to the possibility of creditors not paying, and the tedious administrative and legal processes required to obtain payments can be off putting.

Establishing clear channels of communication with credit customers is key, and there are so many modes to communicate with them - email, letter, fax, text or telephone. As a credit provider, the business should communicate with due diligence to ensure their customer is informed of payment options for every step of the process. A credit controller should communicate and engage with customers regularly, as this will maintain the business relationship, and avoid any moments of confusion when it finally comes to the customer paying their bill. And it is far less frustrating than having to manage huge amounts of debt.

What can be done to accelerate slow payments?

No business operates the same, and different business models require credit control systems tailored to their model. Here is some useful information regarding credit control that is applicable to most businesses:
  • Understanding the customer’s credit history and supply chain can help determine their suitability for credit, as it indicates how likely and when they are going to pay. They may request credit or delayed payment from you due to their creditors not paying them.
  • Accurate information on credit statements, with details of interest, penalties and payment dates must be clearly communicated as often and as regularly as possible. Include contact details to ensure any concerns can be clarified easily.
  • Contact creditors before the payment date to confirm the receiving of the funds on the mentioned day.
  • Notify customers of late payments or lack of funds received immediately after payment date, indicating the penalties incurred. There may have been an incorrect payment processed on their side and transferred into an incorrect account.
  • Initiate a supply stop if non-payment occurs for a prolonged period, as a warning to the creditor. Although, exercise this with caution as they may contract another supplier and put the company out of business and out of pocket.
  • Should all else fail, debt collectors operate on ensuring payment of funds from unreliable credit customers, and relieve the administrative headache.

Obtaining early and regular payments from customers is vital for any business, in an ideal world this would be the standard. In reality however, varying business strategies, financial policies and suppliers will always operate to their own agenda. Not implementing structured systems of informing creditors of payments due can often lead to missed or delayed payments, and the longer the time taken to settle the less likely it is to happen. Primarily, credit control systems conform to established practices and procedures that are customer oriented to ensure safe, easy payment, and are not intended to threaten or jeopardize them. Yet they are an essential safety net to use when the risk of delayed payments threaten the core businesses cash flow.

Image license: Purple Slog, CC BY 2.0
"Information Security Wordle: PC Data Security Standard 1.2"

Sunday, June 15, 2014

Why invest in multi-unit real estate?

Multi-unit real estate investing
Multi-unit investment properties help increase cash flow

By Jeffrey Wallace

Lots of times, when looking for new real estate investments, people gloss right over the concept of multi-units. Many investors feel that multi-units are more for established investors or those with a big bank roll. Sometimes, it’s better to consider the concept over the actual numbers, because in reality investing in multi-units can bring a whole lot of benefits to your investment portfolio and your bank accounts.

The ideal situation

It’s a common thought process to think that buying a single-unit home makes the most sense when it comes to real estate investing. With a single unit dwelling, the situation seems like it would be more manageable and easy to navigate, but the ideal situation may be in multi-units.

When you invest in multi-unit properties, you instantly have more sources of cash flow and obviously more tenants than with a single unit dwelling. With multiple streams of cash flow, expenses such as your mortgage on the property and regular maintenance can be covered with less of a challenge. If there are enough tenants paying enough for rent every month, an ideal situation may surface and you can use leftover income for re-investment in other areas. 

Reasons to invest in multiple real estate units
Higher and more flexible cashflow affords investors more financial opportunity

Managment strategy 

Investing in the right multi-units will also enable you to create a management strategy where the properties themselves are paying for professional companies to come in and manage the properties. It ends up being a big circle, because the type of property is what is enabling you to bring in the expert property management to have a high-quality, highly sought-after property. When you can create a buzz about living there, and a waiting list to get in, the profit will continue on well into the future. 

Long-term investment

Many investors tend to think of investing in multi-unit buildings a hassle, but if you focus only on the investment part of it, you can see that this is something you can ride for years into the future. Not that buying a regular house and having one family live in it can’t be a solid long-term plan, but the “multiple” stream aspect of multi-units makes it awfully attractive.

Higher profit potential 

If you buy into multi-units with the thought of selling down the road, your profit potential is usually higher than if you focus on single unit dwellings. Owning multiple single-unit properties means that you have to manage and care for those investments at multiple locations. If you’re big into it, that could mean ten different locations.

If you have ten units in a multi-unit property, everything happens at the one location. The same parts that seemed complicated at the start will simplify your role as time goes on and will put more money in your pocket.

If you’ve been kicking around the multi-unit investment idea in the back of your mind, or even if you’ve purposely stayed away, check it out and see if it might be right for you. Almost every real estate coaching program I have attended they had advocated for multi units rather than single units. Also there’s nothing to lose by running numbers and asking questions, and potentially a lot to gain.

About the author: I am Jeffrey Wallace, a businessman by profession. Business and entrepreneurship are my passion and I love researching on the various aspects of those areas. I make sure that I don’t miss out any updates and for this reason I read quite a lot. I have a new found interest in real estate and I am passionate to know more about it, as a result I have been attending a lot of seminars and coaching classes on real estate lately. You can follow me on twitter @Jeffrey05206236

Image source: www.shutterstock.com; author owned and licensed

Saturday, June 14, 2014

Tips for finding the best rate on a second mortgage

Second mortage rate tips
Mortgage rate and loan term increase cumulative interest paid
By Jeremy Benson

A second mortgage tends to have an interest rate that’s higher than the original mortgage. This is because your home has been securitized already by the first loan. Furthermore, there are several fees to pay. Before considering the costs, know that there are different products available for your financing needs. A second mortgage is available as lines of credit, through trusts, and private lenders.

Home equity loans and HELOCs 

Equity loans and HELOCs are usually available for those with good credit and a sizable amount of the principal paid, such as 20% of the equity. The loan itself is a lump sum payment given at the start of the lending period. A HELOC is a line of credit, which is similar to a credit card. There is a ceiling to the amount that can be borrowed. Repayment is either a balloon lump sum or loan amortization.

Fees that aren’t included in rates

To help lenders evaluate risk, you will be asked to pay several fees. Be sure to review your costs as this will affect your finances:

    • Fees for appraising your home
    • Activation fee or originator fee
    • Prepayment or early pay-off penalties
    • Miscellaneous dues i.e. stamp duties, arrangement, title and closing fees

      You should ask for full disclosure of bank charges before committing to a loan.

      Understanding the lingo

      Basis points: expressing percentages as a greater number. A 3 percent rate is 300 basis points.

      APR: annual percentage rate

      The term APR can refer to two separate calculations. A nominal APR is simple interest rate. The effective APR is a compound interest rate. So a lower effective APR can actually cost more than a higher nominal rate. Ask the lender’s representative specifically which one they have advertised.

      Since the line of credit is a single payment, the interest is fixed. A HELOC on the other hand can be variable or fixed. If variable, interest is tied to the prime lending rate of the business. In addition, lenders usually charge a margin, which adds to your interest rate. Sometimes HELOCs can start as fixed and at a stated date in the future switch to a variable calculation. Furthermore, to compete for customers, banks, trusts, and other financial lenders may offer an introductory rate. After the initial period has passed, the rate increases.

      Calculating the margin

      Lenders aren’t always clear on how margins are calculated. Most take into account loan-to-value or the combined loan-to-value ratio, the equity on your home, the value of the home, income and credit score. The key to finding a good rate is determining the margin while you’re shopping. Banks and other lenders may not disclose that information at all. Some will provide ranges. Request that the margin be calculated before you proceed to sign anything. For businesses that won’t disclose that information to you, steer clear. You do not want to be locked into a contract with a non-reputable lender who may charge exorbitant fees, risking your home and your credit.

      The basic loan-to-value ratio is determined by using the value of the loan over the appraisal of your home. The combined ratio aggregates all mortgages on the home. The higher the ratio, the greater the risk. In turn, the larger the percentage, the more banks will charge.  

      What you can do

      1. Shop around. Search online for your options because different companies will have different rates available, and enquire with the company who holds your primary mortgage. In addition, keep detailed notes on fees, teaser rates, and most importantly, interest and margins. When comparing APRs, try to state all rates in either nominal or effective rates. This ensures that you’re not comparing apples to oranges.

      2. Choose a time when market prices are favourable. Considering the loan-to-value looks at the price of the home rather than the original principal of the primary mortgage, a house whose price has appreciated significantly over the years will work in your favour when you apply for a mortgage renewal.

      3. Talk to someone about your credit score. You may be able to document some of the life changes that has affected your ability to repay in the past. Furthermore, you should request for a copy of your score. Occasionally, mistakes will be made by those with access to your credit. Rectify the negatives immediately by talking to a financial expert.

      4. Current employment and job history will affect how companies see you. Your ability to support yourself and repay expenses incurred can convince lenders to give more favourable rates.

      About the author: The author of the article is Jeremy Benson. He has been writing about finance, mortgage and Canadian law since 7 years. Blogging is one among his greatest passions. Follow him on Twitter @jeremybenson19.

      Image source: www.shutterstock.com; author owned and licensed

      Friday, June 13, 2014

      How to prevent worker's comp claims

      Employer liability protection
      Active business liability approaches help lower risk
      By Brian Levesque

      Until a business is faced with a workers compensation claim, many owners take a passive stance in avoiding such claims. Not only is this a critical error from the standpoint of employee safety, it can be a costly mistake to your bottom line. While no workplace is without it’s share of hazards, a large amount of businesses aren’t taking proper precautions to minimize risks. This can be done during both the pre-employment stage as well after the employee is on the job. 

      Many times a company can avoid hiring the next employee compensation claim just by taking advantage of resources available to HR professionals. After your staff is in place, there are several measures that can be taken by owners, supervisors and managers to reduce the amount of legitimate injury claims while knowing what to look for to prevent fraudulent ones.

      Invest in the hiring process to keep your EMR down

      Several tools are available to HR managers in today’s world to screen out applicants who might not fit the position or workplace culture. The criminal background check is one of the most common. A credit check may also take place and if you’ll be driving a company vehicle, a background check will be conducted. One check that isn’t possible is a prior workers compensation claim check as this would violate Americans with Disabilities Act as well as other state laws. However after a conditional offer is made, an employer may require a variety of medical screenings to make sure the applicant is fit for employment. Provided the medical examinations are provided to all persons within the same job category these practices do not violate the above acts or laws. Tests like DOT physicals and Isokinetic testing do require an investment with costs ranging from $50 to $150 on average. However, if they are able to detect a strong probability of a future claim, the tests more than pay for itself. Stop a couple of potential worker compensation claims and your business can realize significant returns by eliminating costly premium hikes related to an increase in your EMR.

      Educating management staff on avoiding workplace hazards

      Once you have your employees in place the work doesn’t stop in preventing costly claims. It is your manager’s responsibility to constantly preach safety and it’s your responsibility to make sure they are. It is too easy to get lost in the day to day duties of the job and safety standards become lax. When an accident does occur, your managers have to know exactly what to do, where to gather information, and who to contact. Often times the calamity of the accident causes the latter two to take place much further after the incident than they should.

      It’s important to keep in mind that details can become fuzzy and witnesses to the accident can forget. Making sure you record witness accounts and report those to your insurance provider as fast as possible can be critical in the claims process. If after gathering information and contacting your insurance provider you may suspect fraud. It does happen and even if making it clear that any attempt at fraud will be prosecuted, there are still those who will try to abuse the system. At this point it is within your rights to conduct an investigation and if sufficient findings are present to suggest fraud you should turn over the findings to your district attorney’s office. It would be advisable at this juncture to contact representation of your own as every situation is different.

      It is nearly impossible to prevent all workers compensation claims. Accidents can occur anywhere and the workplace is no different. Taking the necessary precautions above are some of the best ways during the hiring process and on the job to reduce the likelihood of a claim. Some of these tactics may even help you recognize and deal with a fraudulent claim if suspicions arise. Taking a “hands off” approach and assuming the claims process is solely the insurance company’s problem can be a costly mistake you should ensure your business doesn’t commit.

      About the author: Brian Levesque is a professional blogger who lives in Orlando, Florida. He ejoys spending his spare time watching movies and trying new foods. Brian strongly recommends that you visit WorkFlowOrlando.com, if you have been injured because of a workplace safety issue.

      Image license: Paul Keleher; CC BY 2.0  "Construction Workers"