Monday, December 22, 2014

Managing your accounts receivables

I've met a lot of small business owners and entrepreneurs in India in my four years doing business here. If I were to highlight the one aspect that plagues most businesses is accounts receivables.

Accounts receivables is critical to cash flow, and most B2B start-ups and small business suffer from a low accounts receivables turnover (ratio of annual sales to average receivables). If you're selling on credit then it is imperative to maintain a strong collections process to maintain a healthy cash flow. A few lessons learnt the hard way on account of low receivable turnover;

  • Sales entered in books immediately attract sales tax (payable monthly) and income tax (payable quarterly). Ensure you track your cash flow to account for these dues.
  • Vendors (especially foreign supplier) have strict payment terms, so this can get you into a financial bind as you will be in a pressure to clear vendor dues regardless of whether you collect from your clients. Negotiating favourable terms with vendors reduces your risk when collections take a hit.
  • Don't overlook the deal terms in a rush to close a deal. This not only impacts your receivable turnover, but places added pressure and risk on you as a company as the customer now has the upper hand. Be smart in your negotiations, especially on terms. Make sure you collect an advance.
  • Lastly and most important have a disciplined collections process from day one you start your business. Use your CRM and invoicing system for email follow-ups. Review your receivables and follow-up with customers on a regular basis. If required have legal notices sent to customers. Most companies would immediately respond to that. There are also favourable laws for registered MSMEs (Micro, Medium and Small Enterprise), which you can leverage during your negotiations.

(C) glasber

Friday, October 25, 2013

Why I continue to be optimistic about India

Of late there has been a lot of negativity around India's growth story and outlook. This has clouded a lot of the economic optimism in India. Slow growth, uncertain economic policies, rampant corruption and the depreciating rupee. After almost three years of my return back form the US, I must admit there were times that I was contemplating a move back. However, in retrospect a lot of these issues didn't really affect me in my business and career. Sure, this is my personal experience, but isn't what this blog is about :). Here's my take on some of these issues:




  1. Corruption - I haven't had to pay a single rupee in bribes for my business. Yes, we're still small and have been shielded from a lot of the bureaucracy that larger companies are exposed to , but we've had our share of government interactions, and that has so far been clean. We've sold to Government agencies, large private corporations and nowhere in this deal were we asked or have we come close to bribing officials. The closest we did come was in the customs office, where we probably had to grease a few palms to get a duty refund for re-exported items, but we decided to forego the refund than to indulge in bribes. I'm a staunch believer that with the burgeoning of youth in this country, tolerance for corruption is decreasing. They have the stamina to fight this and they can't be taken for granted as they are a significant portion of the votebank
  2. Slow Growth rate - Yes the pundits peg India at a recession with it's sub 5% growth. Policy paralysis, corruption are some factors that get raised. We did see a slowdown in our business as some orders expected to come in from the automotive segments were deferred. But as entrepreneurs we need to be agile, and what was lost in the automotive segment was made up in the government and FMCG sectors. What fundamentally hasn't changed in India is the large middle class, and it being a demand driven economy. India still has more demand for goods and services than supply can meet. If you pick the right areas, you need a much bigger 'recession' to unsettle this demand and thus growth than what we are experiencing now. Malls and restaurants are buzzing, the stock market is at a three year high. Where is the recession again? My advice to folks contemplating entrepreneurship in India. Don't look for game-changers, and differentiators. It's an execution game for us small and medium business, not one of strategy.
  3. The rupee is worthless -  My wife jitters every time I repatriate USDs to India. Yes, it's depreciated about 20%, but as part of our revenue is coming in from exports of services - this has helped. There was a recent article in the Hindustan Times on this topic. Moreover our domestic business has also seen an increase in interest with manufacturers who are exporting or contemplating export. A 20% increase in our goods more than makes up for it with the value they would see in being globally competitive. Their prices are thus cheaper and their quality of products are higher when compared to their international peers. So here again, we're trying to look for ways to take advantage of this decline. We may not be taking expensive foreign vacations any time soon, but I feel this may not have impacted us a whole lot, in fact it might even help because customers are now looking at us for solutions when they were earlier importing them.

So it's not all that gloom and doom from where I'm sitting :)

Tuesday, September 11, 2012

How I almost paid a bribe

One of the biggest anxieties about moving back to India was the thought of corruption affecting daily life , especially that of an entrepreneur. I had the dreaded thought of having to bribe my way into almost anything and everything. After 18 months of going bribe free, it seemed almost a matter of time that I had to cough something up sooner or later. Well it turned out to be sooner.

I was out on an errand this morning when I received a phone call from a Madhya Pradesh check-post official (check post officers guard state border crossings to catch illegal movement of goods). The official claimed that a consignment sent by Qualitas Technologies (my company) did not have the customer's Tax Identification No mentioned and thus he was going to seize the consignment and slap a penalty of Rs 150,000. I asked the official (all in Hindi) what the problem was and why this was such a big deal. He mentioned the details of an invoice that we had generated in January of this year with sufficient detail to prove he wasn't bluffing. He then proceeded to state that due to this missing TIN number, he had the authority to cause a lot of problems. On asking him how I could overcome it he said that he would send me a bank account no and that the consignment (of Rs 400,000) would get released if I deposited Rs 35,000 within the next 15 minutes.  Being caught off guard I wasn't really sure what this was about - I hung up and called my sales and accounts guys about this particular invoice. 

It turned out that this consignment was shipped to a customer in January and that he was reshipping this to his branch office in Noida. During transit there was a check post review where our invoice was part of the transit documentation. I immediately called this customer and told him the situation. On hearing this, the customer's accounts and logistics team was alerted, all paper work checked and it was verified that everything was indeed in order. They told me also that this is a common scam used by octroi and excise officials to harass victims into coughing up bribes in fear of their consignment being seized. Just to be sure, they tracked down the vehicle and it was way beyond MP and somewhere near Rajasthan.

Not wanting to run into hassles that may have occurred, I had instructed my office to wire the money - which I immediately put a stop to (literally in the nick of time). I also told the "official" who called back to stop harassing me and that he could do whatever he wished to do. 

It did definitely catch me off guard though - had I not gotten the information in time from my customers and team, I would have probably gone ahead by paying off this so called official. I'm glad to still stay bribe free for now.

Monday, August 20, 2012

Wait for a Green Card or Citizenship before moving to India?

A common thought for NRIs in the US is to wait for a green card or a citizenship before a return to India. The thought is based on the fact that it takes a long time for Indians (especially in the infamous EB-3 category) to obtain their permanent residency and also to keep options open if things don't work out in India as expected. I have known friends and relatives who moved back at various stages in their GC and Citizenship process. My personal thought on this is not to wait for an unpredictable amount of time especially if you are pursuing entrepreneurship. Plan for it so that you can return within 2 years tops, because that is how long it will take for you to decide whether it would work out or not.

Here's my personal story: I was in a position to have had my GC for about 4 years to when I moved back. In my case, my business was based in the US and I was eligible to apply for a US citizenship. So I went for it. There are three primary criteria for testing eligibility:
1. Continuous residence in the US (you cannot be absent for more than 6 months in a year)
2. Physical presence - you need to have been physically present for at least 2.5 years of the 5 years you were a permanent resident at the time of applying.
3. You need to be a resident of the state (where you are filing your application) for at least 3 months before you submit your application

The process itself is really simple and here are some advice that I was offered which I did not follow. Thought I would share this:

1. You need to be physically present in the US when you apply. I applied from India. 
2. You need to be physically present for 3 months in the US prior to your residence. This criteria just means you need to maintain your official residence for 3 months. So if you have been maintaining an an address for 3 months but you were away on business or something, it doesn't disqualify you from applying. Personally - I was in India and Europe for work for 4 months before I submitted my application.
3. You need a lawyer to represent you during your interview if you long absences from the US. Since I was working out of India for the last year or so, I had pretty long absences. However I didn't hire an attorney which would have cost me $1000 or so. I felt that the requirements and procedure was simple enough for me to do this on my own.

Here was the outcome:
1. Application mailed out on May 1st. Priority Date for my application was assigned as May 8th 2012.
2. Fingerprinting done on June 27th
3. Interview completed successfully on August 9th. Oath ceremony completed the same day.
4. Applied for expedited passport on August 10th and received it on the same day
5. Indian visa applied on 13th and received on the same day. I had apply for expedited processing - I had to get a letter from my wife's doctor recommending I was with her as soon as possible since she was pregnant and due shortly.

So the whole process was completed in 3 months flat.

One important aspect to be aware of as a permanent resident or a citizen of the US are the tax laws. Here is an extensive article on the economic times stating the implications of being a resident (for tax purposes) of the US - but being in India.


Sunday, June 10, 2012

A peek into a local govt run school

The govt run Basaveshwara school
It's been a while since my last post. Sticking to my theme of topics from my post on The Decision Pyramid I had posted some of my experiences related to differences between life in the US and India. Here's one related to making societal impact. When I was a student in one of the private institutions our teachers would often remark that this wasn't a corporation school when she saw us misbehaving. The memories that I recollect from the nearby govt. schools were of garbage and debris dumbed in the premises. The sad part of this is that the govt education system is still bad at the university level. I studied at the govt run UVCE in Bangalore and for two of the subjects we didn't have faculty! Our dean had to invite an ex-student from a nearby research institute to take weekend and evening classes to cover these subjects in the last few weeks of the semester. If one of the more premier institutes like an engg college didn't have faculty what chance does a primary school in a suburb of Bangalore stand?

Well one such school caught the eye of my dad near his house and he along with nearby residents have adopted this school and have been fostering it for last 6 years. From a dilapidated condition with no functional toilets, leaking roofs and a playground strewn with construction debris this school now boasts of record attendance, pass rates and facilities which private schools can envy (see computer lab below)

Computer Lab at the govt. run Basaveshwara school



I had the opportunity to attend an event where there were school uniforms were being distributed to children. Dad had gotten his friends from the Returned NRI (RNRI) Organization to contribute towards the purchase of uniforms. Each child was measured and with the contribution of Gokaldas Exports, school uniforms were tailored for each one. During the event, the local corporator (who was also Dy Mayor of Bangalore) also contributed notebooks.

It was exciting to see this school from what I remember it to be, 5 years ago.  I've seen the hard work done by my dad. Sometimes visiting the school daily to organize mid-day meals, training teachers, and even teaching at the school. It's not easy - but it's tremendously heartening to see such initiatives and the impact it's been making.

Dad and Harish (Dy mayor of Bangalore) handing out notebooks to school kids





Friday, February 10, 2012

All about taxes - Part II

To my sequel of taxation of NRIs in the US here is a brief overview of the Indian Tax rules that may be applicable on your return.

Basically there are three categories you may fall into.

  1. Residents. These are majority of Indians living in India. You are obligated to report your worldwide income to the Govt of India and pay taxes on it. If you have income in the US as well and have paid tax in the US, you may be eligible for a tax credit based for the tax you have paid in the US. But in general you will be paying taxes in both countries on income earned in both countries.
  2. NRIs (Non Resident Indians). If you are away from the country for professional reasons for more than 183 days in a year you become an NRI. In this state you are required to report and pay taxes only on Income earned in India, not abroad.
  3. NOR (Not Ordinarily Residents). This is a transitional state which gets applied to you for 2 years (depending on meeting certain conditions). Basically during your transition back to India you enjoy NRI status (per Indian tax rules) for 2 years until you transition to being a resident. NOR's don't have to report and pay taxes on their foreign income. 
However - one caveat to the above is that there is a new Direct Tax Code due to come into effect in April 2012 which removed the NOR status for Indians and simplifies the tax laws for Indians. Here is an article that describes this in more detail. 


Tuesday, February 7, 2012

Year End Review

I recently returned from visits to the US and Italy and realized during my visit that it's been one year since my return to India and the start of my entrepreneurial journey. I figured it would be fun to create a year end review of the decision pyramid that led me to take the decision in the first place. Were they factors a plus or a negative.

As a recap I had blogged about the various factors that one might think about when contemplating a return -- A decision pyramid as I called it.

Standard of Living and Children (neutral)
I would say that success in India really depends on your ability to manage people. Be it for the comfort of your home and day-day living or be it in your professional work place. India is a land of people and that can be it's greatest assets and it's strengths. One the count of standard of living I would things are neutral. When it comes to day to day living for the large part we lucked out due to living close to my in-laws and them being well established. It was easy to find an office space which reduces commute, we don't have to worry about cooking and cleaning as we have had help with finding good domestic help. We can share resources like drivers, cars, etc. Traffic and Infrastructure though is still a big pain.

Most importantly though the influence grandparents have had on our daughter tops the list. The love and attention she gets would not compare to what she would have had in the US. Thanks to grandparents she speaks her native language (Kannada) , she's very social and generally very happy spending a day with grandparents. Needles to say - so are we (Mansa and I) when we like to get some kid-free time by ourselves..

That being said  the biggest draw back is the lack of professional help when you need. Finding professional nanny's in the US would guarantee prob a min standard. We've been on the look out for one here in India and finding it really hard to find someone we could trust our kids with. I've heard of others who have had better luck than us, so we could be an exception.

Profession and Income (positive)
Here again I would have to refer to my earlier post of  The Economics behind my decision. Based on my interactions with professionals and entrepreneurs alike here in India, the conclusion I have to draw is that the economics of entrepreneurship outweighs that of professionals here in India. Had I landed a successful job here in India I would probably be getting around Rs 4.5 million /yr. Deduct taxes, living expenses, etc. One would be left with around Rs 1.5 to 2 million /year. In equivalent terms I was saving a net of about 3-4 million/year in the US. Now the question is whether my entrepreneurial income would yield better returns. The math here is a bit complex as a lot of my incomes are being reinvested in my company (which otherwise would have gone into the stock market), but to boil it down the simple answer is a yes. I believe in a year the returns I've made with my company is coming close to my professional income in the US. I've been aggressively reinvesting that back in the company however which I personally believe is a far better investment than any other sector (like the stock market).

Social Life and Fun (negative)

This one's a bit of a surprise for us. We expected that on our return back with all our family and friends our social life would be rocking. I think this was a negative on two counts. All of my good friends of 5-11 years were in the US. Fun activities were easier to come by in the US than in India. As an example - on a stressed out day I could take a walk down Lake Washington in Kirkland or walk down to my favorite coffee shop. Doesn't sound like the most exciting activity - but when you needed it it was an option and sometimes could be the highlight of my day. Having been away for a while we've lost touch with some of our friends and with the ones we are in touch, they're not a short drive away.  However the positive is that many of our friends and family from the US visit Bangalore often so we get to see them and spend time with them here as well.
This part of the pyramid takes a while to establish. Since our move back, we've met some great people we've done our bit of culinary research and have hit upon a few local favorites, etc. So given a little more time we hope to turn this around :)

Societal Impact (N/A)


Nothing to score ourselves on here. Although presented with a number of opportunities, we've not had a chance yet to make any kind of impact other than some modest donation to charity (which we used to do  during the Microsoft charity drive).