Do our systems create rebels out of entrepreneurs?
Solve this… Person V does consulting for Person G. The deal is closed, Person G promises to pay Person V. Invoices are issued and Person G changes colour to stall paying out Person V.
Person V has invested months of personal time, employee time, rent and other overheads to close this deal and it is one of the largest deals in its sector in India.
Person V has waited to close this deal expand his team (unaware that Person G has other plans). Person V builds a framework to build on the success of this deal. A data mining platform is built which creates new opportunities at minimal costs. The newly hired team starts work and is successful to pay for itself and start repaying the money taken from investors.
In between a large deal with Person K is done in which Person K pays 25% and then starts to make excuses to avoid payments. Infact the taxes collected by Person K are not paid for months which puts Person V in a position where he might have to cough up taxes that he hadn’t collected! The stalling of payments creates a cash outflow situation for Person V.
Now, the predicament our legal, tax, investment and family places on Person V.
- Tax department says pay service tax and income tax on revenues that were invoiced but not received. This will lead further cash outgo.
- Investor says only book what is received, this leads to a book loss as the money that isn’t received so shouldn’t be booked.
- Legal says you should litigate for dues which is long tailed. Additionally to prove your case follow point 1.
- Family & Investors say your running a loss (on the books) so cut down or shut down.
- How each faction interests is pitted against each other is quite visible.
Person V wants to get paid and is making all out efforts to own up to his responsibility, sending emails, messages, legal notices and even taking on political forces head on to get his dues.
Meanwhile Person V is confident that the new business that has been built can repay the investors even if the money from Person K and G continues to be outstanding.
In this entire scenario the blame is on Person K and G for not paying on Person V but the entire system works in a manner that it blames Person V for actions of Persons K & G instead of getting Person V his dues. Family, Investors and Government don’t want to take responsibilities for getting Person V paid (so they all get paid) and will instead take the role of blaming the Person V for the actions Persons K & G.
Meanwhile Persons K & G are roaming around posting pictures on social media about how awesome their lives are.
What should Person V do?
Milind Desai
This is a very common scenario in Indian Businesses. Ideally, there should be a credit check system in place. Whereby any goods or services purchased on a credit period, is subjected to a credit check (Very similar to one you have when applying for loans and credit cards). If the client delays / defaults in payments, it should affect their respective credit file (Like it happens in all EU/UK/AUS/AMER regions) and make them difficult to purchase things on credit from other vendors.
There is simply no other way that this situation will improve in India.
Have worked in the AR / Collections departments for a number of years so i exactly can understand the plight of Person V.
Wonder when will this ever get implemented in India.
ShowMeDamani
There should be a website on the lines of the National Sexual Offenders list that rats out all people who have skimped on paying valid invoices.
I’ll put up money for that!