Any businessman whose company works with clients on deferred payment terms would like to have less debt. Accounts receivable reduces turnover, reduces profitability, creates problems with collection, etc. But you cannot refuse to lend to customers, otherwise they will go to more accommodating competitors.
Despite the fact that at first glance the problem of debt seems insoluble, this is not at all the case. Any company can build a system of debt management processes that will help reduce the overall size of “receivables” and prevent the emergence of dubious and hopeless non-payments from the point of view of collection.
This article will help you create a corporate debt protection system.
Dealing with debt should be a manageable process
Most often, a company’s problems with debts arise in a situation where it provides deferred payment to all clients indiscriminately, as well as if the internal processes for registration, execution and control of transactions on deferred payment terms go “by themselves.” When both of these phenomena occur in a company, debt problems, as a rule, very quickly lead to bankruptcy.
In order to avoid the main difficulties associated with debt, it is necessary to make the process of working with receivables manageable. This doesn't require much.
First, analyze the indicators of existing debt, as well as its previous dynamics. One of the key rules of management: if you want to manage something, then you need to measure its indicators. The results of the study help to understand to what extent the existing situation corresponds to the desired one and in what direction it is necessary to move if the planned and actual diverges.
Secondly, it is necessary to determine the conditions for granting deferred payment to counterparties. It is important that the company’s employees have a clear understanding of which clients, for what amount, period and under what conditions a deferred payment can be granted, as well as whose authority it is.
Thirdly, it is necessary to establish mechanisms for verifying the counterparty before the transaction. The assessment of the buyer's solvency and reliability, as well as the potential risks of the work, must be carried out according to predetermined criteria. The less “shamanism” there is, the more balanced and reasonable the decisions to work or refuse to work on deferred payment terms with one or another counterparty will become.
Fourthly, it is important to regulate the entire process of completing a deferred payment transaction from the moment of signing the documents to the execution and control of the transaction. In addition to thinking through all the steps, it is necessary to appoint those responsible for each stage, as well as develop document forms that will be used in the work.
Fifthly, it is necessary to competently implement new work rules in the company. If all the developed tools and methods of debt protection remain only on paper, the company will not benefit from this. Moreover, its losses will increase, since losses will arise as a result of the organization’s resources being wasted on planning activities for working with “receivables”.
Sixth, it is important to periodically analyze the effectiveness and efficiency of debt management and, if necessary, make changes to the current algorithm.
Analysis of the receivables status
If you have never analyzed your business based on the points listed above, now is the time to do it. The sooner problem areas are identified, the greater the company’s chances of reducing and preventing financial losses. Every organization has areas that need improvement. After all, as doctors joke, there are no absolutely healthy people, there are only those who have not been fully examined.
It is useful to find out the total amount of “receivables”, the ratio of overdue and planned debts (i.e. those for which the repayment period agreed upon by the parties in the agreement has not occurred), justified (i.e. arising on the basis of granting the counterparty a deferred payment according to the established company rules) and unjustified debt (i.e. provided in violation of company rules).
It would also be useful to analyze the indicators of overdue debt by dividing the “receivables” into groups depending on the duration of the delay: up to 30 days, up to 60 days, up to 180 days and over 180 days. It is worth highlighting bad debts in a separate category - those for which the established statute of limitations has expired, as well as those for which, in accordance with civil law, the obligation has been terminated due to the impossibility of its fulfillment on the basis of an act of a state body or the liquidation of an organization.
Determining the conditions for granting deferred payment
Determining the conditions for granting deferred payment to counterparties allows the company to form a unified approach to lending to clients. At a minimum, the following conditions should be significant:
- duration of deferment;
- transaction amount on deferred payment terms;
- the amount of interest (surcharge for granting deferred payment) by which the cost of the product (work, service) increases compared to the price when purchased on an advance payment basis;
- a person authorized to conclude a transaction on deferred payment terms;
- methods of ensuring the fulfillment of obligations that are subject to mandatory use when concluding a transaction on deferred payment terms
All company-defined rules for working with counterparties must be formalized in the form of standard contract forms for each type of transaction. The authority to conclude transactions should be specified in the relevant powers of attorney.
For convenience and clarity, all the developed conditions can be summarized in a table, which, for example, may look like this:
| No. | Duration of deferment | Transaction amount on deferred payment terms |
The amount of percentage (surcharge for granting deferred payment) by which the cost of goods (work, services) increases compared to the price when purchased on an advance payment basis |
A person authorized to enter into a transaction on deferred payment terms |
Methods of ensuring the fulfillment of obligations that are subject to mandatory use when concluding a transaction on deferred payment terms |
| 1 | 2 | 3 | 4 | 5 | 6 |
In addition to developing the terms of deferred payment, it is important to determine which counterparties it can be provided to. Practice shows that the lowest risk of overdue receivables arises when working with counterparties who:
- have been on the market for a long time;
- have a stable financial and economic position;
- have a good business reputation;
- acquired a positive credit history in the previous period of cooperation (if any).
In contrast, counterparties that have just been registered, do not own any assets, have minimal staff, do not have an established reputation, etc., very often become problem debtors. That is why it is useful to determine which companies can be granted a deferred payment and which cannot. This can be done by filling out the table:
Checking the counterparty
Checking the counterparty before concluding a transaction is necessary in order to determine the possibility of granting him a deferred payment. It is important to note that for small transactions the verification can be carried out according to a simplified scheme, but for contracts with a large price it must be thorough and extensive.
A simplified verification can be carried out using open sources on the Internet, thanks to which you can verify the correctness of the key details provided by the counterparty, as well as obtain information about its financial problems. An electronic service posted on the website of the Federal Tax Service of the Russian Federation allows you to check the fact of registration of a legal entity, its address, OGRN, INN, etc. Information about the litigation the counterparty has (who he is suing, for what reason, for what amount, including on the issue of declaring a counterparty bankrupt) can be obtained by accessing the “Card Index of Arbitration Cases” service on the website of the Supreme Arbitration Court of the Russian Federation. On the website of the regional Office of the Federal Bailiff Service, it is easy to find out the presence/absence of enforcement proceedings in which our counterparty is the debtor.
Information obtained from these sources makes it possible to assess the likelihood of financial losses of the counterparty as a result of the collection of monetary amounts from it by the court or declaring it bankrupt. The availability of bankruptcy information, among other things, can also be checked using a special electronic service on the website of the Kommersant newspaper.
In addition to those listed, there are a number of other sites that can and should be used as part of a simplified verification of a counterparty. For example, a bankrupt register, a register of unscrupulous suppliers, etc. It is not possible within the scope of this article to talk in detail about all open sources of information that can be used to check the reliability and solvency of a counterparty.
To conduct an “enhanced” check, you can request from the counterparty copies of the company’s constituent and registration documents (notarized), as well as information on the size of net assets (in the form of a certificate in any form), copies of the balance sheet and profit and loss statement as of the last reporting period date. In addition, you can personally visit the counterparty’s office and request an official extract about the client from the Unified State Register of Legal Entities or the Unified State Register of Individual Entrepreneurs. Depending on the specifics of the business and the transactions concluded by the company, other measures may be used for verification. It is important to note that when performing a “strengthened” scan, by default you should also perform the actions included in the simplified version.
Regulation of the process of concluding, executing and monitoring a transaction
Regulation of the process of concluding, executing and monitoring a transaction is important, since any mistake with documents can negate all the positive results achieved by the company through the development of conditions for granting deferred payments to counterparties, as well as the creation of a mechanism for checking them. As an example, I can give a situation that I encountered. The company shipped a batch of rolled metal to its client on a pick-up basis. The cargo was accepted by a representative of the management of the purchasing organization. Due to the fact that he did not have a power of attorney to receive the cargo at the time of acceptance of the cargo, the delivery note was handed over by an employee of the sales department of the supplier company along with the cargo under the buyer’s promise to return the document with a mark on acceptance of the cargo the next day. Contrary to the promise, the buyer did not return the delivery note either within the agreed period or after a week. Payment for the goods was also not received. The debt was repaid only after a significant period of time thanks to the titanic joint efforts of the security service and the company’s legal department.
In order to avoid such situations, it is important to clearly define the persons responsible for each stage of the transaction, as well as the actions and records that each responsible person must perform. Practice shows that, regardless of the type of business a company is engaged in, all transactions it concludes can be divided into four stages.
- Preparation of a transaction on deferred payment terms.
- Concluding a deal (signing an agreement).
- Execution of the transaction (except for payment).
- Control of receipt of payment (within agreed terms).
Therefore, clarity is required for each step given. For convenience, I recommend that you summarize all the necessary information in a table, which may look like this.
| No. | Deal stage | Responsible person | Mandatory actions and records of their completion |
| 1 | 2 | 3 | 4 |
| 1. | Preparation of a transaction on deferred payment terms | ||
| 2. | Concluding a transaction (signing an agreement) on deferred payment terms | ||
| 3. | Execution of the transaction (except for payment) | ||
| 4. | Control of receipt of payment (within agreed terms) |
Introduction of new rules for working with accounts receivable
It is important not only to develop new rules for working with accounts receivable, but also to correctly implement them in the company. In any team there are people who are happy about changes, and there are also those who are opposed to any innovations. That is why the implementation process must be thought out in advance, and its implementation must be under the strict control of the company’s management.
The main fears of staff when implementing any changes are the fear of the unknown, as well as the fear of losing their jobs due to the emergence of new methods and standards that allow tasks to be completed with fewer employees. In this regard, the following steps can be taken.
- Develop a plan for introducing changes with deadlines, responsible persons, etc.
- Notify everyone about what will happen in the company, when, for what purpose and in what order. This can be done in different ways, depending on the size of the company and the characteristics of its corporate culture. For one organization, it is important to hold a general meeting, for another - sending out an information letter to the email addresses of all employees, etc. During the notification, it is important to emphasize that employees are an asset to the company and the changes being carried out will not lead to any layoffs or reductions. It is also important to note the positive aspects of the upcoming changes for employees. Tempting “carrots” may include:
- the opportunity for workers to expend less effort on performing work;
- reducing the number of conflict situations in the team that arise due to the absence of a person responsible for certain actions;
- material incentives for employees who will most quickly and efficiently implement changes in their work, etc.
- Conduct training on new rules for working with accounts receivable.
- Monitor the progress of implementing changes and, as necessary, take actions to support the progress of this process in the planned volume and on time.
Analysis and improvement of work with accounts receivable
Life does not stand still. Even the most advanced mechanism becomes outdated over time, so it is necessary to periodically analyze and improve the company’s existing rules for working with accounts receivable.
It is important that all activities carried out as part of improving the system of working with receivables lead to increased efficiency. This is what matters for the company, and not the ostentatious weight of the compiled documents gathering dust on the shelves. So, for example, using a publicly available source such as the Internet to check a counterparty, where you can learn a lot about a potential counterparty, will give a positive result, but, say, creating a colorful corporate code for working with debtors can be a waste of company resources if this tool will not be used by staff.
The rule “money in the morning, chairs in the evening” became firmly established in the everyday life of our entrepreneurs at the very beginning of the development of our economy. However, evolutionary transformations both in the economy as a whole and in various industries have somewhat changed the rules of operation for individual suppliers of goods. More and more buyers (customers) are demanding to receive goods in installments or deferred payment. The counterparties who ask for this delay can be understood: all the money is in circulation and it is easier to collect the required amount when the goods have already been sold. Of course, suppliers are not delighted with such work patterns, but they understand that for business development, deferred payment is a powerful tool that allows them to sell more products and increase turnover. So, let’s try to understand this tool, determine its main features, differences, risks for the parties and prospects for protection from unscrupulous competitors.
Many have heard of such a thing as a commercial loan. It is this term in civil law that refers to the terms of a contract under which the shipment of goods (work, services) and payment do not coincide in time. This includes advance payment, prepayment, as well as deferred and installment payments. That is, if the goods arrived today, and payment for it will be conditional tomorrow, you should know that this is a commercial loan.
I would like to immediately say that a commercial loan should not be identified with a financial loan, since these are completely different institutions. Only credit institutions have the right to provide financial credit (based on a license from the NBU). A commercial loan does not require separate legal registration from the parties; its terms are included within the framework of civil contracts for the performance of work, provision of services or sale of goods. Interest for using a loan is an essential condition of a financial loan agreement, but for a commercial loan they are voluntary.
The main provisions on commercial credit are contained in Article 1057 of the Civil Code of Ukraine (hereinafter referred to as the Civil Code). After reading this article, you will probably notice that it talks about the transfer of goods (things) defined by generic characteristics. However, it would be a mistake to think that Art. 1057 of the Civil Code prohibits the provision of credit under contracts involving the transfer of another group of goods (things) with individual characteristics, since a commercial loan applies to absolutely all goods that are not prohibited from circulation.
The sale of goods on credit with deferred or installment payment, as a type of commercial loan, is regulated by Article 694 of the Civil Code of Ukraine, the features of which will be discussed below.
It is important to say right away that installment and deferment, although, in essence, are commercial loans, are, by their nature, different. When paying in installments, you are given the opportunity to pay for any product you have chosen and purchased on credit in small amounts of money. In this case, it is assumed that the payment will be stretched, that is, partial payments according to a strictly established schedule over a certain period of time. These forms of payment are especially popular in small wholesale and retail trade, as it is very convenient and accessible to a huge number of ordinary buyers.
Deferment involves a one-time payment for the goods transferred to the buyer in full and within the period specified in the contract.
Among the legal features of edging and installment payment, I would highlight the following.
Firstly, the price of goods sold on credit is fixed on the date of sale in accordance with Part 2 of Art. 694 GKU. Thus, if the price increases before the final settlement takes place, the seller does not have the right to demand additional payment from the buyer. An exception may be the case when such a right is expressly provided for in the contract.
Secondly, from the moment of transfer of goods sold on credit until payment, the seller has the right of pledge on this product in accordance with Part 6 of Art. 694 GKU. This means that the buyer has the right to sell or otherwise dispose of the goods only with the consent of the seller. However, this restriction may be abolished if this is indicated in the contract.
Thirdly, in case of late payment, the seller:
Has the right to withdraw from the contract and demand the return of unpaid goods, regardless of the period of delay, at least one day, which corresponds to the provisions of Part 4 of Art. 694 GKU. However, please note that this rule applies only to deferment, since it does not apply to installment plans (Part 3 of Article 695 of the Civil Code of Ukraine);
Charges interest at the rate of 3% per annum on the overdue amount + inflation index for the entire period of delay, i.e. from the day when the goods should have been paid for until the day of its actual payment (Zbz. 1 part 5 article 694. h 2, Article 625, Article 536 of the Civil Code).
It is important to note that the mentioned interest is a kind of sanction for the debtor, so they should not be confused with the accrual of generally accepted interest for using a loan.
Fourthly, the contract may provide for the buyer’s obligation to pay interest on the cost, which corresponds to the price of the goods sold on credit, starting from the day the goods are transferred, which is expressly provided for in paragraph. 2 hours 5 tbsp. 694 GKU.
By the way, sometimes the seller delays the transfer of goods, for example, because the supplier let him down. Is it fair to demand payment of interest and penalties for late payment? As can be seen from the above-mentioned norm, interest on the loan is not accrued until the goods are transferred to the buyer, which cannot be said about sanctions. Based on this, in order to avoid misunderstandings between the parties, it is worth making changes to the contract and postponing the payment deadline due to short delivery of goods. Otherwise, if the seller delays shipment for an indecently long period of time, the buyer can, using the provisions of Art. 665 of the Civil Code, unilaterally withdraw from the contract. Moreover, he has the same right in the case when the delivery of not the entire product, but only part of it, is delayed. But then, as a rule, the basis is already the norms of Art. 670 GKU.
To summarize, we can say that in order to prevent negative consequences when providing an installment plan, it is necessary to very carefully (high-quality) formulate the terms of the contract, indicating: the period for which payment is deferred; determining the moment of transfer of ownership of the goods (date of actual transfer of goods/signing of documents, etc.); the amount of payments for using a trade loan - interest (in the form of interest on the principal amount of debt or a fixed amount) and determining the procedure for their payment.
However, regardless of the quality preparation of the contract, the seller, when selling goods on credit, in any case bears certain risks of non-receipt or incomplete receipt of payment for the goods, the ownership of which passes to the buyer at the time of shipment.
To obtain additional guarantees of payment for goods, we would recommend:
- draw up a separate pledge agreement with the buyer, in which the sold property can be the collateral;
- draw up a guarantee agreement with a third party;
- receive a bill of exchange from the buyer.
In addition to these guarantees, it is mandatory, before concluding an agreement, to check your “future” counterparty for location, number of personnel, availability of a VAT certificate, debt on other payments, absence of a bankruptcy procedure, compliance with the KVED of its actual activities, etc.
Finally!
One of the effective ways to ensure the fulfillment of obligations during a deferment or installment plan could be a debt insurance policy. This method of risk management is very developed in European countries. In Ukraine, this method of ensuring the fulfillment of obligations is the exception rather than the rule, since such insurance contracts are rare, which is due to the peculiarities of running the insurance business.
On the other hand, for a supplier who is really interested in good buyers, the advice of an experienced insurer would be very useful, since the insurer would check all the supplier’s debtors and determine for whom to set what limits. It is clear that for unreliable partners the limit will be zero, this will force the supplier to think about whether it is worth cooperating with such a buyer.
It is clear that after an assessment carried out by an insurance company that identifies unreliable partners, there is a temptation to refuse to purchase a policy, especially since the tariffs for this type of insurance are quite high - up to 3% of each delivery, but for assessing the financial condition of the debtor and setting a limit you will have to pay separately.
In conclusion, I would like to say that selling goods on credit is always a risk, especially during an unstable economic situation. Therefore, in each individual case, be vigilant, calm and attentive, adhering to the above recommendations.
Regarding the return of goods to a legal entity that was not sold by the customer - a legal entity!
Answer: Each agreement provides for the rights and obligations of the parties. If we are talking about a supply (purchase and sale) agreement, its main component is the fact of delivery of a quality product and, accordingly, the fact of payment for this product. If these obligations are fulfilled, then the contract is considered fulfilled. If such an agreement provides for the right of a party to return the goods due to the other party not selling them, then in this case the return of the goods is possible. If there are no such restrictions, then such goods cannot be returned. If failure to provide certain documents (certificates) is considered the basis for returning goods, then this can only indicate improper fulfillment of the terms of the contract. This may be the basis for applying to court for compensation for possible damage caused by these actions (possibly in the amount of goods not sold), but not the fact of returning the goods.
Deferred payment is a period of time during which the borrower ceases to fully or partially pay his obligations to the bank for the issued loan. Deferred payments are sometimes called credit holidays or credit holidays. The period for which it is provided depends on the type of loan, the period of its execution, as well as the solvency of the client.
Not every borrower can apply for a deferred payment. To obtain it, you must have financial difficulties. The client should not be able to pay the required monthly loan installments. Read about what situations may be a reason for postponing payment in this article.
In some agreements, banks stipulated in advance the conditions for obtaining a deferment. The consumer needs to study the contract for the presence of these clauses before contacting the bank to obtain a grace period for loan repayment. To use the service, you need to write an application to the bank. All documents confirming your insolvency must be attached to the application. At this link you will find an example of a letter requesting a credit holiday.
The reasons why you can ask for a credit holiday can be very diverse: loss of a job, theft of property, fire, addition to the family or death of a loved one. The borrower's situation should lead to unexpected and large expenses.
The bank can provide deferred payment in several options.
- Firstly, you may be offered a partial suspension of payment of funds. For example, when the client continues to pay only interest on the loan.
- Secondly, you can arrange a complete stop of payments for a certain period. In this case, the borrower completely stops paying his loan obligations for the agreed period of time.
Sometimes lenders refuse to provide such a service, and there are certain reasons for this. We are considering them.
Will payments change after the end of the credit holiday? The client will again have several options. In the first option, monthly payments increase, but the term remains the same. In the second option it's the other way around. The loan term increases, but the payment amount remains the same. In addition, the bank will have to pay interest for providing a deferment. In any case, the option that will be more convenient for the borrower to pay is selected.
The lender may refuse to provide a credit holiday, but offer the client restructuring or refinancing.
If you want to know how to get a loan without refusal? Then go through
Payment deferment– the most popular way to improve payment terms for supplies by supplier. An agreement with the supplier to pay, for example, 14 days after delivery, is in some industries a prerequisite even for the first transaction. The deferment must be specified in the contract - if this is not done, then in accordance with the law, the obligation to pay for the goods buyer The default is immediately after receiving the goods.
In this article you will find answers to the following questions:
- If you are a seller: how much money are you actually giving the customer when you give him a deferred payment? If you are a buyer: how much real money does the supplier spend on you?
- What is more profitable - working with a supplier on a deferred or prepayment basis?
- How to determine the best offer among suppliers by comparing their different prices and different payment deferrals?
Formula for calculating the cost of deferment
Don't forget that any payment deferment– these are the real financial costs of the supplier. In my practice of managing commercial departments, I made an estimate of the cost of deferment when I confirmed it to the client as 2% of the delivery amount for one month of deferred payment. Many executives I know have taken a similar cost-of-money and risk-based approach.
Factors influencing the cost of deferred payment for the buyer
Picture 1
To calculate the savings that the buyer will receive by agreeing with the supplier on deferment of payment, you can use the following formula:
OP = (KDO / 365) x (BP / 100%) x SK,
where OP is the cost of deferred payment, rub.;
SK – the amount of the contract, agreement, transaction, rub.
Figure 2
This formula provides a fairly accurate understanding of how much money you save by using deferred payment supplier. The logic of this formula is that you estimate how much money you would need to spend to attract a loan from a bank in order to pay the supplier upon delivery.
You can also think of this formula as a way to estimate how much money your company spends providing deferment of payment to your clients. In this case, entrepreneurs add about 20% to the resulting number, taking into account the risk of non-repayment of money and the costs of collecting overdue debt.
Factors influencing the cost of deferment to the supplier
Figure 3
Example of calculating the delay effect
Let's look at an example of how to evaluate the economic effect of a deferment for a buyer. Let's assume you buy canisters from a supplier on a pay-as-you-delivery basis. During long and difficult negotiations, you managed to get the supplier to deferred payment 21 day. The amount of your order will be 1 million rubles. The financial director told you that at the moment your company can attract borrowed money from the bank at 22% per annum. Let's estimate the cost of deferred payment in this case:
OP = (21 / 365) × (22 / 100) × 1,000,000 = 12,658 rubles.
We can assume that 12,658 rubles. you saved the company. If payment deferment was not received, the company must pay the supplier 21 days earlier, and this would require borrowing money from the bank. RUB 12,658 - this is the money that would have to be spent for the company to use a loan of 1 million rubles. within 21 days.
When assessing the cost of credit money, it is correct to take into account not only the annual percentage, but also all kinds of one-time payments to the bank for opening a credit line: various commissions, costs for processing and insuring collateral, and other expenses that arise during the process of processing and servicing the loan.
When assessing the cost of deferment, some businessmen consider not the bank interest, but the percentage of profitability of an alternative investment (for example, in shares or a side business), or a fixed percentage tied to the profitability of the business.
The calculation formula I have given will also be useful if you buy goods from a supplier on an advance payment basis, and also with long delivery. In this situation, you can assume that you are lending money to the supplier. The cost of prepayment can be calculated using the same formula, only instead of the number of days of deferment, substitute in the formula the number of days from the moment of payment until the goods arrive at your place.
In some companies, the client is quoted a price, to which, depending on the number of days of deferment, a certain percentage is added. For example, the price of a product is 200 rubles, if you want a deferment for a week, the price will be 202 rubles, if for a month – 210 rubles. In this case, the first thing the buyer should do is to maximize the prices offered with deferred payment, and secondly, the profitability of such an offer is calculated.
Assessing the profitability of a deal with a delay
An assessment of the profitability of the price of a product with a delay compared to the price of a product without a delay can be done using the inequality:
NZO / (100% - NZO) x (365 / KDO) x 100% ≤ BP,
where NPO is the premium for deferment, % (the amount of the lost discount if the transaction is with a deferred payment);
KDO – number of days of deferment;
BP – bank percentage of borrowed funds, %.
Figure 4
If the inequality is satisfied, it means that it is more profitable to use the supplier’s money than credit money, so the delay in this case will bring additional profit to the company. If it is not fulfilled, and the left side of the inequality is greater than the right, the delay is unprofitable.
For example, you buy cans from a supplier on a payment-on-delivery basis. Price per canister – 200 rubles. During the negotiations on changing the terms of delivery, you settled on the fact that for the price you are interested in deferment of payment 21 days the cost of a canister will be 206 rubles. The financial director told you that your company can currently raise borrowed money at 22% per annum. The bonus for deferment is (206 ‒ 200) = 6 rubles. or 3%. Let's evaluate the benefits of working with deferred payment in this case:
3 / (100 - 3) × (365 / 21) × 100% = 53.75 ? 22
53,75% > 22%
The left side turned out to be larger than the right. The inequality shows that under such conditions, working with a supplier with deferred payment unprofitable. You need to sit down at the negotiating table again, or make a management decision: agree to continue working with payment upon delivery of the canisters, or prefer a deferred payment that is more expensive than credit money. In the example above, it is profitable to work with a delay of 21 days if the price increases by no more than 1.25%.
Many foreign manufacturing companies with which I cooperate do not work with Russian suppliers on deferred payment terms. Their task is to get the lowest possible price and set of conditions instead of a delay. The cost of European money at a lending rate of 3% per annum on average is six to ten times cheaper than Russian money. Therefore, for a European company to work with Russian suppliers on a deferred basis often tantamounts to ineffective and expensive lending.
Comparison of terms and conditions between two suppliers
If there is a need to compare two suppliers with the same product, but with different prices and deferred payment(other things being equal), you can use the “conditional purchase price” - an estimate of the purchase cost taking into account the deferment:
UslZak = ZAK x (1 – (BP / 100%) x (KDO / 365)),
where UslZak is the conditional purchase price taking into account the deferment provided by the supplier, rub.;
ZAK – purchase price, rub.;
BP – bank percentage of borrowed funds, %;
KDO – number of days of deferment.
Figure 5
For example, we have two offers from suppliers “Alpha” and “Beta” for canisters. The canisters are absolutely identical and, other things being equal, only the price and delay differ among suppliers. Supplier Alpha offers a price of 200 rubles per canister. and doesn't give deferment of payment. Supplier "Beta" provides a price of 205 rubles. and gives a 30-day grace period for payment. Let's assume that your company can raise borrowed money at 22% per annum. Which offer is better? Let's calculate the conditional purchase price for two suppliers:
“Alpha”: UslZak = 200 × (1 – (22 / 100) × (0 / 365)) = 200 rub.
“Beta”: UslZak = 205 × (1 – (22 / 100) × (30 / 365)) = 201.3 rub.
Thus, despite the fact that supplier Alpha does not offer deferred payment, its offer, taking into account the cost of deferment, will be more profitable than that of supplier Beta. It can be calculated that the supplier's offer "Beta" becomes more profitable than "Alpha" provided deferred payment more than 41 days.
How negotiate a deferment
Postponement pl ateja– the most important condition of the contract with the supplier. I recommend that buyers begin discussing the size of the deferment after certain agreements have been reached on the price - if you start negotiations with a deferment, it will be included in the price.
If the supplier himself offers a deferment, the buyer’s task is to achieve the lowest possible price with a maximum deferment, and then receive the price subject to prepayment. After this, calculate the profitability of the deferment using the above formula.
If you are currently working with deferred payment, get the lower prepaid price and evaluate the effectiveness of these two prices using the above formula. Conduct several transactions without a deferred payment, and then attempt to obtain a deferred payment while maintaining the recently received prepaid price.
If you are a seller, remember that every day of deferment granted costs your company some money, and be sure to “sell” the deferment - it is actually an additional discount that your client receives. Don't forget also that deferment payment it can be not only 14, 30, 60 days, but also 11, 26, 47 days.
When applying for a loan, each borrower expects to regularly repay the debt, and, if possible, to terminate the agreement with the bank by paying off the entire amount of the debt ahead of schedule. Naturally, not all plans are destined to come true: force majeure situations often arise in life, which make timely payment of the loan impossible. Many borrowers immediately contact the bank in the hope of getting a loan deferment. Is it so easy and how effective can this type of banking “help” be? Let's try to answer these questions.
Types of deferred payments under a loan agreement
Deferment of loan payments is also called credit holidays. In practice, the following types are distinguished:
- Vacations “on the body of the loan”, or postponement of the repayment of the principal debt. The borrower pays only the interest on the loan, and the “body” (the main part of the debt) temporarily does not repay. The option is not profitable, since as a result the loan term increases and, accordingly, the amount of overpayment: the client can only pay a fixed amount of interest for 1-12 months, which is accrued on a non-decreasing amount of debt. If credit holidays “by body” are issued at the beginning of the loan agreement subject to an annuity loan repayment schedule, this option is not only not profitable, but also not effective. Interest prevails in the total amount of the planned loan payment at this stage, i.e. It will not be possible to reduce the payment significantly.
- Vacations “by percentage”. An extremely rare, but very profitable option. The borrower can repay the loan amount without paying interest. It is unlikely that it will be possible to significantly reduce the payment, but in this way the total overpayment on the loan is sharply reduced.
- Vacations with the opportunity not to pay both the body and interest. Banks usually provide such a deferment for more than 1-3 months.
If it is not possible to repay the loan, even a vacation can be a saving solution for the borrower, but, unfortunately, banks do not provide this opportunity to every client.
Requirements for the borrower or who can receive a loan deferment
The following categories of borrowers can count on credit holidays:
- citizens who have temporarily lost their source of income;
- women on maternity leave or parental leave until the child reaches 1.5 years of age;
- borrowers who, for medical reasons, require long-term treatment;
- persons who have lost their breadwinner or are forced to pay for the treatment of a close relative;
- borrowers planning to move (or moving to another city);
- clients who are experiencing financial difficulties due to reasons beyond their control (for example, if the borrower’s apartment burned down, a car was stolen, etc.).
Please note that in all of the above cases you will have to prepare supporting documents and certificates. If you have lost your job, the bank will most likely require a certificate of registration with the employment center to exclude the possibility of fraud (the borrower may find employment unofficially). In addition, be prepared for the requirement to attract guarantors: if the lender doubts your continued solvency, as a safety net, he will ask your relatives to act as guarantors of loan repayment.
With a high degree of probability, banks will refuse to provide a deferment to the following categories of clients:
- borrowers who are in arrears (including those with outstanding debt) and people with a damaged credit history;
- persons who have been using a loan for less than 3 months, or those borrowers whose loan agreement will expire in 3 months;
- employees who quit of their own free will (if there is a corresponding entry in the work book);
- clients in respect of whom the bank suspects fraud.
If you understand that you can count on a deferment without delay, submit a written application to the bank branch where you applied for the loan. The further outcome will depend on the operating rules and credit policies of the financial institution.
How to arrange a deferment of loan payments
Each bank has a different approach to applying for a loan deferment. In general, there are 3 generally accepted solutions to the problem:
- If the loan agreement describes the conditions for granting a deferment, the bank acts in strict accordance with these standards. In most cases, the agreement specifies the permissible deferment periods, the conditions for its provision (this service may be paid) and a list of documents required from the borrower.
- If the loan agreement does not say anything about the possibility of providing a deferment, the bank may consider each application on an individual basis. The decision is made by a collegial body - the credit committee.
- Some lenders, immediately after receiving the client’s application, offer him to use one of the approved standard loan restructuring schemes (you can arrange not only a credit holiday, but also extend the term of the loan agreement, reduce the rate, etc.). Sberbank works according to this scheme.
List of banks providing credit holidays
At the moment, deferred payments are provided by banks such as Bank of Moscow, Promsvyazbank, Home Credit Bank (only in the form of one of the restructuring programs), Svyaznoy Bank, DeltaCredit, Orient Express Bank, BystroBank, etc.
For example, Orient Express allows borrowers to pay only interest for 1-3 months, while the term of the loan agreement increases during your credit holiday. The offer is not valid for all borrowers, but only for clients served in certain tariff plans. Vacations can be taken out no earlier than 3 months after receiving the loan and no more than 2 times during the entire loan term (the interval between vacations must be at least 6 months).
The Bank of Moscow offers clients experiencing financial difficulties and no arrears a deferment of repayment of part of the monthly scheduled payment for a period of 1 to 12 months. Clients undertake to pay only interest or half of the accrued interest. It is possible to extend the loan for the duration of the credit holiday. This restructuring program is valid for clients who have taken out consumer loans, express loans, car loans and mortgages.
Promsvyazbank offers clients to “postpone” 2 full scheduled payments or 2 payments on the loan body with payment of accrued interest. The offer is valid for customers who issued loans after 09/05/2011. In this case, the term of the loan agreement is extended for the period of the credit holiday.
DeltaCredit Bank offers a deferment in payment of the loan body to borrowers who have taken out a “Young Mortgage” loan: the terms of the restructuring are negotiated individually after consideration of the application.
Svyaznoy Bank provides holidays for no more than 1 month and no more than once a year. This service is available to clients who have no arrears and have been using the loan for more than 3 months, provided that there are more than 2 months left before the end of the loan agreement.
Trust Bank also offers clients holidays as part of various promotional programs, but this lender has a paid service, so borrowers need to be careful.
To summarize, we note that contacting the bank with a reasoned application for a deferment is not only an attempt to maintain your positive credit history, but also a method of protection. Even if the creditor refuses you, you are in arrears, and the case goes to court, a copy of your application can be proof that you tried to solve the problem in a civilized way.
