Accounting is a method of systematically recording financial data to know about the sustainability of the company. This procedure is done using various principles and terms. Accounts Payable is one of the main terms of accounting.
A creditor is a person or entity that owes money to another, which can be any person or entity (including the government). In most cases, the borrower must pay interest on the loan along with the principal. A creditor is usually called a borrower, but if a company's debt is in the form of securities, it is called an issuer.
A debtor's relationship is complete with a creditor, where the creditor is the entity that owes the debtor money. For example, 'A' borrows money from the bank. A is debtor and bank is creditor. But if money is deposited in bank 'A', A is the creditor and the bank the creditor here.
RDB Act 1993 is an Act to establish tribunals for expeditious settlement and recovery of debts owed to banks and financial institutions and for matters connected or incidental thereto.
The Securitization and Reconstruction of Financial Assets & Enforcement of Security Interests Act, 2002 is an Act to regulate securitization and reconstruction of financial assets and enforcement of security interests and matters connected with or incidental thereto.
Debts. Recovery Tribunals and Debt Recovery Appellate Tribunals
Debt Recovery Tribunals (DRTs) and Debts Recovery Appellate Tribunal (DRAT) were established under the RDB Act, 1993 with the specific objective of speedy adjudication and recovery of debts owed by banks and financial institutions.
At present, there are 39 DRTs and 5 DRTs functioning across the country. Each DRT and DRT is headed by a Presiding Officer and a Chairperson respectively.
Credit sales mean buying goods and services now and paying for them later. This will increase sales, and more credit sales means more debtors.
Selling on credit has become a competitive strategy among sellers. This trend has increased among borrowers.
Credit sales result in a trusting and positive relationship between the customer and the seller. This results in the goodwill of the firm and an increase in its creditors as an asset.
Demerits of the debtor ;
Having a Debtor can prove detrimental to the firm
More debtors mean less current cash flow. This will adversely affect the operation of the firm, as it will prevent the debtors from paying large sums. A large amount of debt involves a high risk of default. Therefore, keeping large debtors is a risky idea.
More debt means less liquidity. This results in fewer investments for the future. This will hamper the growth of the organization.
At Avenue Business Services, we can help businesses in the Whiteley area get cash flow and avoid bad debt. Here are some tips…
Bad debts are very dangerous for new and expanding businesses, as they can hurt cash flow.
Here are 10 tips to avoid bad debt:
Get a credit reference on the firm you plan to do business with in these methods,
- avoid doing business with companies with poor credit ratings.
- Make sure the other company knows your payment terms from the start.
- Invoice at first opportunity.
- Clearly state the payment terms on your invoice.
- If payment is not received by the due date, send a reminder as soon as possible and no later than one week after the due date. It is good practice to have a policy to follow up on the debt after a certain number of days after the due date.
- If there's still no response, chase up the debt over the telephone. This will enable you to determine if there are any questions on the invoice and, if not, to negotiate a date for settlement.
- Write, fax or post to confirm the agreed settlement date.
- Clearly state that the subject (after an agreed extended period) will refer to one.
- A debt collection agency.
- A firm of lawyers, or,
- County Court Small Claims Department.
If you still have debt after this, keep your word and take action
You must be logged in to post a comment.