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5 ways to get your invoices paid faster

As a freelancer, small business owner if you are unable to recover your dues from your clients, we have listed ways which will help you recover your payments due.

Apart from getting an MSME (Micro, small and medium enterprises) registration under the MSMED Act, 2006. The below mentioned 5 ways should help you present your brand and business as a well organized professionally run setup which your clients cannot take for granted:

Get a personalized Email account

We checked profiles of many freelancers/small business owners on Instagram and found most of them using their personal Gmail accounts. Sending a word invoice from your personal Gmail accounts doesn’t put across the best face for your brand/business. Purchasing an email account (YOUR NAME@YOUR BUSINESS/BRAND.COM) would cost you around INR 1,500 per year which is a real investment to your business.

Have a Signed agreement

When you are discussing a potential engagement with your client, discuss clearly the scope of your engagement, the fees and the timelines for delivery of your work and the payment terms. Put all these points in a one-pager agreement and let your client sign and give you a copy of this.

If you are currently doing this by setting out your terms on an email, putting this on an agreement and getting your clients to sign the terms makes it more professional and something your client knows he has signed upon. If you are worried about the turnaround time of getting assigned application, use online tools like DocuSign to get your agreements signed instantly.

Complete your Vendor Onboarding

Before you start the work and while signing your agreement, ask your client to finish the vendor onboarding for you. Big companies generally follow a detailed vendor onboarding process and this may take anywhere from a week to a month to get you onboard as their vendor so that they can pay you once you send them your invoice. Get this done right away so that by the time you are done with your deliverables, your invoice can be sent directly for processing.

 

Raise invoices using an invoicing tool

I bet many of you must be sending an invoice in excel or word to your clients. How about sending a professional looking invoice which goes directly from an application as an email to your clients with your branding? Cool, isn’t it? We use and recommend Quickbooks application for raising your invoices. This is a cloud-based accounting application which you can access from your phone, tab and computer system. It comes at an annual cost of INR 5,000 and the Company keeps running some discount offers all the time.

If you are looking for a free application to use, you should consider Genie books. It is free for users with a turnover of up to INR 1.50 crores. When you raise an invoice, always mention the due date in the invoice itself as per your terms of the agreement.

 

Review your invoices and follow up diligently

The above accounting applications (Quickbooks and Genie books) gives you a dashboard look for your business. You can check invoices sent, whether your clients have viewed the invoice you had sent them and invoices past their due date. Isn’t it great! Review the dashboard at least weekly and take necessary TIMELY follow up actions like a boss!

 

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Investing in Gold

Apart from Fixed Deposits, Gold and Real Estate have been the other favourite avenues for investors in India. Gold particularly has been very close to the heart of Indian families, generation after generation.

Gold acts as a very good investment in times of high inflation as it is a natural hedge to inflation. Also, in times of uncertainties in economies and currency values, investors flock to gold as they consider it the only asset to have real value. There are a number of options through which you can invest in Gold:

 

Jewellery

This is the most popular form of investments by Indian households. Purchase of Jewellery by the women of the house on festive and other occasions acts like an unintended SIP wherein you invest at regular intervals. 

Pros: 

  • Easy to purchase from the next door jeweller.

Cons: 

  • Issues with respect to purity of gold can crop up.
  • Regular use of jewellery results in wear and tear and reduction in the weight of the gold.
  • On sale of the jewellery items, making charges are deducted resulting in lower gains for the investor.
  • Storage of physical jewellery in a safe place is a problem.

Do you have Gold in your Portfolio?

 

Gold Bars and Coins

Gold bars and coins can be purchased from your local jeweller or from a bank. 

Pros: 

  • You can save on the making charges incurred for purchase of jewellery.
  • Gold can be bought in quantities as small as 1 gm.
  • Gold Bars…score over jewellery in terms of purity.
Cons:
  • Safe Storage is again a problem with Gold bars and coins.
  • They are sold at a price higher than the prevailing market price increasing your cost price.
  • Banks do not purchase back gold bars and coins. So you have no option but to sell it to the local jeweller which is generally at a small discount to the market price. 

 

Gold ETFs

This is also known as paper gold. As the name suggest, Gold Electronic Traded Funds(ETFs) can be traded on the Stock exchange. Just like you purchase a share, quantities of gold can be purchased and held in your demat account.

Pros: 

  • No Storage worries as gold purchased is directly credited to your demat account. No Purity Issues as well.
  • Gold can be purchased and sold at real time at the prevailing market prices.
  • Gold can be bought in quantities as small as 1 gm.

Cons: 

  • You need to have a broking and demat account to buy a Gold ETF. Brokerage costs need to be incurred on both purchase and sale of Gold ETF units.

 

Hybrid Funds

Of late a number of Mutual Funds have launched Schemes which invest in a mix of Debt and Gold or Debt, Equity and Gold. Investing in such schemes enables you to get some exposure to the yellow metal.

Pros: 

  • Like all other Mutual Fund Investments, these funds can be a part of your portfolio at no brokerage cost and without a demat/broking account.
  • No Storage costs and no Purity Issues. 
 Cons:
  • Your exposure to gold depends on the call taken by the Fund manager of the scheme.You cannot take exposure in defined quantities.
  • Forced to stay invested in debt/equities as a part of the Hybrid Scheme.
 In the past few years, Gold ETFs have become the most popular form of investment in gold because of their obvious advantages. However, physical jewellery still enjoys the largest share of Gold sales India.
Mutual Funds

Mutual Funds Jargons Simplified

Asset Management Company(AMC) is the business face of the mutual fund as it manages all the affairs of the fund. Investment professionals employed by the AMC determine which securities to buy and sell in the fund’s portfolio, consistent with the fund’s investment objectives and policies. In addition to managing the fund’s portfolio, the AMC often serves as administrator to the fund with the support of the R&T agent and the Custodian.

Bid Price is the price at which a close ended scheme repurchases its units. This is also known as “Repurchase Price”.

Close Ended Scheme is any mutual fund scheme which has fixed tenure. The period of maturity of the scheme is specified at the launch of the Scheme. These can be equity or debt schemes. An example would be Fixed Maturity Plans(FMPs).

Entry Load is an amount paid by an investor at the purchase of the units of mutual funds. The amount is towards the expenses incurred by the AMC for distributing the Mutual Fund Schemes. An amount equivalent to 2.25% is deducted from the amount paid by the investor towards the entry load and the rest amount is invested to buy units of the mutual fund. However, as per the recent ruling by SEBI, there will be no entry load on the money that one invests in any mutual fund scheme and the entire money invested will be used to buy mutual fund units.

Exit Load is the amount paid by an investor when he sells his units of a mutual fund. The same is towards the expenses incurred by the mutual fund towards the floatation of the mutual fund and other operating and administrative expenses. The load is usually a percentage of the amount invested by the investor. It is generally levied on early exit by an investor (before one year for equity fund).

Money Market Instruments mean to include commercial papers, commercial bills, treasury bills, Government securities having an unexpired maturity upto one year, call or notice money, certificate of deposit, and any other like instruments as specified by the Reserve Bank of India from time to time. To summarise, these are debt instruments for short term (less than one year) where the liquidity of the investments is high.

Mutual Fund is an institution which pools money from various investors and professionally manages the investment in the various instruments. The investments of the mutual funds are driven by the investment objectives of the scheme.

Net Asset Value (NAV) is the net worth of a scheme. It is calculated as all assets of the scheme less all its liabilities. NAV per unit is NAV of the scheme divided by the number of units outstanding on the date of valuation.

Offer Document is the document that a mutual fund issues to the public and invites them to subscribe for units of a scheme. This is the most important document for an investor as it contains important information about the scheme. Apart from other things, the offer document contains the investment objective of the scheme, tenure of the scheme in case of close ended schemes, details of the trustees, investment manager, expenses, tax impacts, etc.

Offer Price is the price per unit offered to an investor by the mutual fund for subscription to a scheme. It is also known as “Sale Price”.

Open Ended Scheme, as against a close ended scheme is a mutual fund scheme which has no specified duration or maturity. The offer for sale is open with no time limits.

Redemption Price is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are related to the NAV of the scheme.

Repurchase Price is the price at which a close ended scheme repurchases its units. This is also known as “Bid Price”.

Sale Price is the price per unit paid by the investor to subscribe for a scheme. It is also called “Offer Price”.

A Sponsor is the promoter who sets up the Mutual Fund, appoints trustees and the AMC in accordance with the SEBI Regulations.

Trustee is appointed by the sponsor. The trustee holds the property of the mutual fund for the benefit of the unit holders and is responsible to the investors of the fund. The trustee is vested with the general power of superintendence and direction over AMC.

Unit is the interest of the unit holders in the scheme. It just is like a share of a company held by the shareholder.

Unit Holder is a person who is holding the units in a scheme of a mutual fund. The term is comparable to shareholder in case of a company.

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How to invest in mutual funds?

When investing in Mutual Funds, the investor is again spoilt for choices. Just like the numerable mutual fund schemes, the investor has the following routes to actually execute the investments. Direct Investment: Investing in any Mutual Fund involves getting hold of the Common Application Form of the scheme one wants to invest in, filling it up and signing it and submitting it along with the cheque to the Investor Service Centre of the specific Mutual Fund. If the amount of investment exceeds Rs. 50,000 in a year, then it is mandatory for the investor to first get his KYC (Know your customer) done.
                                                                                       Whatever route you may take, you must invest
Your Advisor: The most obvious choice is to invest through your Financial advisor. As he advises you on the investment choices, most Advisors also facilitate the execution of the investments. It saves you the work of doing the running around. A Mutual Fund Agent/Distributor: Just like an insurance agent, a Mutual Fund agent will help you make the investments. Post the banishing of entry loads on Mutual Funds(the 2.25% entry load), an agent may charge you a fee for facilitating the transaction. He may also double as an advisor. Your Bank: If you are a Do-It-Yourself investor, then investing through your bank is a good option. Banks like HDFC bank and ICICI bank offer the facility to do the investments online with no paper work involved as against the conventional route. Mutual Fund Websites: If your bank doesn’t offer you online facility, you can choose to invest through the website of the Mutual Funds directly. Payment can be made online through Netbanking facility offered by the Mutual Funds. However, you needs to remember a separate password for each Mutual Fund you want to transact in. Third party  Websites: The best option for a Do-It-Yourself investor is to purchase mutual funds through the online route provided by some Mutual Fund specialist companies in India. Two of them are FundsIndia.com and fundsupermart.co.in. Both do not charge any fee for opening an online account with them. Even Paytm and other apps have now started mutual funds investments. The Stock Exchanges: From December, 2009 Stock exchanges in India have started offering the facility to transact in Mutual Funds through their brokers and sub-brokers. This has widened the reach of the Mutual Funds network. However, this route has not been successful because of the brokerage cost and the conflict between the brokers’ interest in frequent trading versus Mutual Funds being a long-term investment tool. At the end of the day you, as an Investor, will choose the route that offers you good service and value for money.
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Factors to check before you Invest

Choosing an Investment product is the most difficult decision for an Investor. Investments in products are nothing less than a marriage wherein a number of factors need to be considered before one takes the final decision: Return: This is the first factor to be considered while making an investment decision. Depending on the returns one expects to earn, the investment is chosen. Equities offer higher returns compared to deposits, but they also have a higher volatility associated with them. One cardinal rule for investors here is, Higher the Risk, Higher the Return one can expect on his investments. Risk: Risk refers to variability in returns. The risk associated with an investment is an equally important factor and is ignored by investors at times. Investors, sometimes, choose a product with a higher return without looking at the associated risks. Ex: If Product A offers a 15% return with an 18% risk(measured by Standard deviation) and Product B offers 16% with a 25% risk. Though Product B yields a higher return, Product A is better than Product B on a risk-adjusted basis. Investment Constraints  The amount of risk that an investor can take in search for returns is affected by the following factors:
Marrying products with Investor Goals
Time Horizon: A longer time horizon enables an investor to take higher risk. A long term horizon evens out the volatility associated with equities and real estate investments. If the investor needs to withdraw the money in the near term, it is better to invest in debt instruments which offers a lower return but have a higher degree of certainty with the investment. Liquidity: Liquidity refers to the ability to sell an investment at a fair value with minimum associated costs. Equities score over Real Estate investments in this parameter. One can sell equity investments at the prevailing market price and receive the sale proceeds in a couple of days(T+2). Real estate investments suffer from the unavailability of their market price and have large transaction costs. Taxation: Taxation has an impact on reducing the net returns in the hands of the investors to the extent of taxes paid to the government. Returns from various investments should always be evaluated post-tax. Ex: Holding other factors constant, if a Fixed Deposit offers 10% taxable and the PPF offers 8% tax-free rate of return, for an investor who pays tax at the 30% slab rate, the PPF offers higher post-tax returns. Regulatory Issues and Other factors: Regulatory factors may impose restrictions on the minimum and maximum amount that can be invested in a product. A certain category of investors is not allowed to invest in certain instruments. For example, Only senior citizens can invest in the Senior Citizen Savings(SCSS) (Refer       ) and up to a maximum of INR 15,00,000 only. Anticipatory changes in regulatory factors also have an impact on the choice of investments. While making an investment decision, an investor needs to consider all the above factors in sync with each other. Keeping in mind the above factors, the properties of the various Investment products need to be matched with the goals of the investor for a perfect marriage.
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Weird (Non) Investing Reasons

My interactions with a cross section of investors has thrown up weird reasons for not investing and equally strange reasons for investing one’s money. Why I term them as weird is because there is no reasonable logic for the same. 

REASONS FOR NOT INVESTING

Lack of time!

Many people have all their savings lying in the bank account earning a meagre 3.5% only because they do not have the time to look at their Financial matters.

Lack of Understanding!

There are others who decide not to invest because they do not understand the various investment products. For them Investments mean Fixed Deposit. Major chunk of the individuals fall under this category.

Too many Investment Options!

Some are too perplexed with the various investments options available that they decide not to go through the Investment process at all. Thanks to inflation, the money keeps diminishing in the Savings bank account.

Why not take the Helping hand of an Advisor

 

Don’t want to pay Financial Advice Fees!

Many investors do a hit and trial, ask friends, search around for information and gather some details. This category makes an effort to invest, which is insufficient. But they are not ready to hire a Financial Advisor. Reason being, we in India are never used to paying fees for Financial Advice and want status quo to remain.

Investments is a specialised field and over a period of time you will realise that the growth in your investments far exceed the fees you pay to your Financial Advisor. 

 

REASONS FOR INVESTING

The Agent was a Friend or a Relative!

I rank this THE MOST WEIRD REASON for investing. Whether the agent is a relative or a friend, Do you earn money for yourself or so that the agent can fill his pockets at your cost? Many people invest without looking at the the suitablility of the investment, just to please the relative/friend agent.

Tax Saving!

While this is the least controversial reason for investing, in India it has become the most important one. Most people invest money only so that they can save taxes. Instead of tax saving being taken into account in the whole investments process, the entire investment process happens to save tax. That way the individual saves tax, but loses out on appropriate returns on his investments. 

You have worked hard to earn your money; it’s time to make your money work hard for you.

Kisan Vikas Patra (KVP)

Kisan Vikas Patra(KVP) is a safe long-term debt instrument. KVPs are issued by the Government of India. Eligibility: Any individual can purchase a KVP, singly or jointly. Investment Limits:  The minimum amount is Rs. 1000. There is no maximum limit. It is available in the denomination of 5000, 10,000 and 50,000.
Grow your wealth steadily
Rate of Return: KVPs come with a 7.30% rate of return, compounded yearly. Money invested in KVPs doubles in 9 years and 10 months (118 months) Issue of Certificates- In case of cash payment certificate will be issued immediately while in case of purchase by locally executed cheque, pay order or demand draft the same will be issued on realisation of such locally executed cheque, pay order or demand draft as the case may be. Time Period: KVPs have a maturity of 9 years and 10 months. Withdrawal: Investment in the certificate is locked until maturity. If the Certificates are encashed after 2 years and 6 months at values as per the table issued by Post Office. Tax Treatment: Interest on KVP is taxable on an accrual basis and will be taxed as Income from Other Sources. deduction under section 80C is not allowed on this investment. TDS is not deductible on Interest on KVP. Others:The Certificates can be transferred from one person to another after one year from the date of the certificate with the consent of the Postmaster. One can avail a loan against the KVPs by pledging them with the bank. FinPlan Café Note: Positives: Safe long term investments. Negatives: No periodic cash flows are received from investment in KVPs. No tax benefits associated with KVPs. Conclusion: Just like NSCs, KVPs is best suited for one looking for higher assured returns and safety of principal. One will have to compare the post tax returns on NSCs versus KVPs based on the tax slab applicable to each person before making a choice.
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Mutual Funds: Pros and Cons

Over a period of time Mutual funds have become a very popular investment vehicle in India. The reasons for the popularity of mutual funds among investors are many: 

Professional Management

Qualified Professionals manage the Mutual Funds and attempt to maximise the returns and minimise the risk within the stated objectives of the Mutual Fund Scheme. 

Diversification

This is the biggest advantage of investing in a mutual fund, especially for a small investor. This ensures that the investor is not exposed to the risk of a single sector and is not dependent on the performance of one company.

INNUMERABLE ADVANTAGES

Low Costs

An investor can get exposure to professionally managed Mutual Fund investments for as low as Rs. 500. They can get exposure to big tickets investments(like some Fixed income instruments) through Mutual Funds. Also, SEBI has capped the maximum amount that can be charged as an Expenses to the fund based on the fund size.

Liquidity

Mutual Fund Schemes held by an investor are very liquid. They can be redeemed at the NAV of the Scheme which is declared every day and the redemption proceeds are received by the investor in T+2 days i.e. within two days of the date of redemption. 

Choice of schemes

An investors can make a choice from a large number of Schemes so that the investments match with his objectives and goals. 

Flexibility

Within Schemes, investors are provided with a number of options like Growth Option, Dividend Option, Reinvestment Option, Systematic Investment Plan (SIP), Systematic Transfer Plan (STP), Systematic Withdrawal Plan (SWP), etc.

Mutual Funds have come out with a number of innovative products like Trigger facility, transfer of equity gains to a debt scheme, etc. to satisfy the needs of the investors. 

Transparency

This has increased the confidence of investors in the Mutual Fund Structure. Information is available to investors through fact sheets, offer documents, annual reports, periodic investment statements, etc. on a periodic basis.

Taxation

Dividends received from equity schemes of Mutual Funds (i.e. schemes with equity exposure of more than 65%) are completely tax-free. Equity schemes held for more than one year do not attract any capital gains tax on redemption. 

Well Regulated

SEBI Regulations govern the mutual funds industry and protect the interest of investors. This also ensures transparency in the operating of the Mutual Fund. 

DISADVANTAGES

Though very less compared to the advantages, Mutual Funds suffer from the following disadvantages:

(a) In case the manager does not perform well, the fund may give returns lower than the index.

(b) The investor has to pay a management fees and other expenses even if the fund gives negative returns. Returns are not guaranteed.

(c) Investors have no say in their portfolio as the same is managed by the AMC as per the scheme objectives and customisation for an individual investor is not possible.

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Understanding a Mutual Fund

A Mutual Fund is a TRUST that pools the savings of a number of investors who share a common financial goal.

The money collected is then invested in capital market instruments such as shares, debentures and other market securities. The investments of the mutual fund are driven by the investment objectives of the scheme.

The income earned through these investments and the capital appreciation realised are shared by its unit holders in proportion to the number of units owned by them after recovery of the management expenses.

Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. 

About MF_1

FLOW OF FUNDS

The following are the parties to a Mutual Fund: 

Unit Holder: is a person who is holding the units in a scheme of a mutual fund. The term is comparable to shareholder in case of a company. Unit holder can be a resident individual, HUF, company, NRI, partnership, society etc. 

The Mutual Fund: As stated, the Mutual Fund is the legal entity in the form of a trust which holds investments of its Unitholders. 

Sponsor: A sponsor is the promoter who sets up the Mutual Fund, appoints trustees and the AMC in accordance with the SEBI Regulations. Generally the sponsor and the AMC are part of the same business house. 

Trustee: A trustee is appointed by the sponsor. The trustee holds the property of the mutual fund for the benefit of the unit holders and is responsible to the investors of the fund. The trustee is vested with the general power of superintendence and direction over the AMC.

About MF_2

INTER RELATIONSHIPS

Asset Management Company(AMC): AMC is the business face of the mutual fund as it manages all the affairs of the fund. Investment professionals employed by the AMC determine which securities to buy and sell in the fund’s portfolio, consistent with the fund’s investment objectives and policies. In addition to managing the fund’s portfolio, the AMC often serves as administrator to the fund with the support of the R&T agent and the Custodian. 

R&T Agent: The Registrar and Transfer Agent (R&T) helps investors with the purchase of units in the Mutual Fund schemes, redemptions and switches, change of address and bank details and resolving related queries and complaints. CAMS and KARVY are the key R&T agents in India.

Custodian: The securities which form a part of the mutual fund’s portfolio are usually held by an authorized custodian. The custodian is like the mutual fund’s demat account.

Distributor: A distributor acts as an intermediary between the mutual fund and the investor. He helps the investor choose the right fund as per the investor’s objectives. Mutual fund units can be distributed by only AMFI registered, certified distributors. 

AMFI: The Association of Mutual Funds in India(AMFI) is a body dedicated to developing the Indian Mutual Fund Industry on professional, healthy and ethical lines and to enhance and maintain standards in all areas with a view to protecting and promoting the interests of mutual funds and their unit holders. 

SEBI: SEBI is the market regulator in India which, apart from other functions,  overseas the functioning of the entire Mutual Fund industry with the objective of protecting the interest of investors.

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SIP Impact: Well Illustrated

There was once a poet who fell upon such hard times that he was no longer able to feed his family. Hearing that the king greatly encouraged talent and was famed for his generosity, the poet set off for the Royal Palace. When brought before the king, he bowed low and asked that he may recite poem. On hearing his recitation, the king, well pleased, asked him to name his reward.

The poet, pointing to a finely wrought chess board before the king said, “Your Highness, if you place just one grain of rice on the first square of this chess board, and double it for every square, I will consider myself well rewarded.” “Are you sure?”asked the king, greatly surprised. “Just grains of rice, not gold?” “Yes, Your Highness” affirmed the humble poet.

“So it shall be” ordered the king and his courtiers started placing the grain on the chess board. One grain on the first square, 2 on the second, 4 on the third, 8 on the fourth and so on. By the time they came on the the 10th square they had to place 512 grains of rice. The number swelled to 5,24,288 grains on the 20th square. When they came to the half way mark, the 32nd square, the grain count was 214,74,83,648 – that is over 214 crores. Soon the count increased to lakhs of crores and eventually the hapless king had to hand over his entire kingdom to the clever poet. And it all began with just ONE GRAIN of rice.

Moral of the Story: Never underestimate the power of compounding. If you stay invested long enough, it will work for you. A small sum invested every month from the beginning of your work-life can lead to a very impressive amount at the time of your retirement.

Source: Sundaram Mutual Fund advertisement.

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