Without Getting Imbued in Debts

Big money, small money - somehow in today's times, no matter how one saves or earns, it never seems enough. Not unless all you do is stay at home, have no relatives and friends, do not travel, do not invest, do not have hobbies and never meet with illness / catastrophe.

How does one risk over-spending, or having to resort to "borrowing" in order to meet their monetary needs? Well, many things could happen, subject to  the following (list is not exhaustive):

• new hobby or addiction
• new status which may require extra spendings for social requirements
• sudden illness or dismemberment
• sudden death of sole breadwinners
• sudden loss of jobs
• natural disasters, fire or other perils
• business failures
• investment losses
• upcoming nuptials or newborn
• victims of scams

The first and easiest step people think of would be to resort to taking loans from the banks, or worse, loan sharks (aka moneylenders). This subjects one to (i) high interest repayment (ii)ease of borrowing means more future loans (iii) implicating family members or jointly-owned assets and may even result in (iv) depression or bankruptcy.

In order not to become imbued in debts, let's look at some steps that may be of assistance:

1. Curb spending

If the expensive lifestyle is beyond your means, cut down on it or change your lifestyle. No point breaking the bank just to impress someone or hang out with people that you cannot currently afford. If they are still around when you choose a lower level of lifestyle enjoyment, then you know they are true friends for keeping.

2. Seek professional help

If the addiction or reason for splurging are not controllable i.e. gambling or alcohol issues, seek professional help to kick the habits. 

3. Seek financial help

If your financial situation is in the low, and are eligible for governmental assistance, talk to the town council or relevant organisations.

4. Work harder

If you must sustain your lifestyle or hobby, or are only suffering from financial woes due to loss of job / business failure, you can always work harder (i.e. take up a freelance or part time job) or a sideline that brings in additional income

5. Arrangement with the Banks

If you have credit card and credit line debts that you can no longer afford to repay monthly, but the annual 24% interest is still rolling, speak to the bank for an arrangement. They will cancel your credit facilities, consolidate your total debts, and arrange a repayment scheme for you at a much lower interest rate

6.  Selling of Items

Get rid of unwanted items or unnecessary luxuries by selling them away on Carousell, Ebay, or bazaars etc. This will get you some extra cash or a lot of cash (if you have lots of branded items to rid).

7. Pawning of Items

If you have valuables such as jewellery or expensive watches you can let go of temporarily, talk to a pawn-broker. They will assess your item and offer you cash for your items, subject to a very low repayment rate. Don't worry, your items won't be auctioned off as long as you continue repaying the loan, and each time you pay the loan tenure is extended by another 6 months.

8. Liquidating Policies

If you have endowment policies that you have saved up for many years and have now generated a healthy value, see if there is cashback option. If not, you might want to surrender them to help with your financial predicament.  After all, if you are unable to sustain it anymore, it will still lapse.

9. Downgrading of Housing

If you have parents who own their own houses / flats, you might want to consider moving in with them temporarily (subject to your family's consent / arrangements) so you can rent out your BTO / condo for extra month, until you tide through your crisis.

Hope the above helps!

Debts Reduction for small businesses

You are a small to mid-sized business with borderline healthy financial status, or probably in need of funds for liquidity purpose. However, economy is bad these days and many clients have either delayed or defaulted payment. You may have an Accounts Receivables accountant but her job is not to call clients all day long to chase for payment. Here are some tips you may wish to look at, to reduce debts owed to you:

1. Suing a Client-

Unfortunately, always the first thought that comes to mind but always should be your LAST resort.  Suing someone is expensive- your legal expenses may be higher than the amount owed to you. Furthermore, this brings about adverse publicity to your company, and damages relationship between you and your client.

2. Sending Letters of Demand-

Law firms and some debt collection companies are authorised to do so.  An LOD comes with an official letterhead and may be enough to intimidate your debtors to pay up soon.

3.  Debt Collection Company / Mediation-

Major debt collection companies such as JM Rogers, Singapore Debt Collection Company, Miliken and Craig etc, have professional mediation officers who will be happy to assist you into reaching a settlement mode that does not damage your relationship with the clients.  Payment may be slow, but eventually you get your monies back.

4.  Selling your debts / invoices-

Some debt collection companies, as well as new apps such as SmartFunding allow you to sell your debts or invoices to them. So they pay you (not 100% usually) of your outstanding invoices, you keep the money - and they in turn will take over to chase your debtors for monies owed.

5. Conducting Credit Checks-

Before you enter into business with a company, or extend credit terms to them, it helps to do some research on them to ensure that they are not parties to a suit or have bad credit history. Companies such as Dun & Bradstreet and DP Information etc are examples of some firms that specialise in providing credit monitoring of your clients for you, so you do not enter into business with companies with poor credit ratings.

6. Take note of your Accounts Receivables-

Your accountants should be able to monitor and flag "bad" customers who owe money after credit terms, or fail to pay in full. As such, your company should attempt to regain payment and stop supplying goods / services to these clients unless they clear previous debts first.

7. Talk to your Customers-

This depends on how close you are with them, or what the nature of relationship is. If you are comfortable, approach the boss of the company (someone at your level) to try to understand if they are facing any difficulty. If they are willing to negotiate for installment payment terms, it saves you time and money in engaging professionals to perform the task for you.

8. Be in the Loop-

Follow the news closely if you can, or at least be in time for archives of news. Don't conduct business transactions with companies that have just been on the news for negative reasons (owing of debts, shares dropped dramatically, etc) lest you are not able to get payment. This is not a form of discrimination against companies with bad publicity or just underwent mishaps - but really a pre-caution. Think, why would a company that is about to wind up order 3 vessels from you?

9. Start Small-

If you are unsure about a new client, or provide very niche products, you might want to start small to test waters first. Once trust is established and you are more comfortable with them, feel free to expand business opportunities with them.

10. Don't Write off Debts too soon-

Some "easy-going" bosses write off debts too soon - either taking pity on a customer's plight or not wanting to destroy years of relationship. At the end of the financial year, their own set of accounts nearly give them a heart attack, having written off so many sums of debts - after all, small sums add up to tremendous ones. Keep some around, drop friendly hints for repayment and collect whatever you can - until it truly becomes a bad debt by irrevocable means (i.e. company collapses or owner dies / flees).