The Psychology of Late Payment in Our Business and Personal Lives

When we get into a cycle, it is hard to break it, even if the cycle is as vicious as that of late payments. It affects both our personal and business lives negatively and will only hurt us more and more in the long run. How do these cycles happen and how do we break them?


High Interest Rates Are Brutal For Late Payments

The reason that this happens is that those with less financial means tend to think in the more short term range. Getting ten dollars now is much more valuable to them than getting twenty dollars next week, which causes them to use money-lending sites like Wonga to debt-freeget quick loans. In fact, Wonga advertises that borrowers can get up to four hundred dollars within minutes of their loan being approved. Wonga is a very popular money-lending company. However, their interest rates are staggering. Their standard APR is 5,853%. And yet they can get away with it because of the poor man’s psychology.

Poor Man’s Psychology

The poor man’s psychology is simply discounting future costs for the present’s decisions. To someone who is desperate to pay the bills before the bank forecloses, it is worth getting a loan with five thousand percent annual percent interest rate. At least at the time. When the bill comes due with all of the interest and late payment fees, then they begin to regret their decision. But they needed to save their house. How did they get so poorly off that their home was in danger of foreclosure?

This also goes back to the poor man’s psychology of instant gratification before long term effects. Even with a well-paying job, it is easy to go broke unless the money is handled properly. Thinking in the short term range means more impulse buys, splurging, and unnecessary luxuries are made until a whole week’s pay is gone and there isn’t any money to buy groceries. So you take money out of your checking for groceries even though that money was supposed to go to your car payment. To make the car payment,you take money out of your account that was meant for your mortgage payment and so on.

How to Break the Cycle

The easiest way to stop yourself from being ruined is to keep yourself from getting into the cycle to begin with. Budget your money and stick to it. Try to live on only ninety percent of your income so you can use the other ten percent for emergencies, investments, and saving for the future.

If you’ve already found yourself getting behind on the bills and you’re not sure how to get out, then stay off the money-lending sites all together. They will only hurt you long term and if you make decisions with the long-term in mind then you will be happier even in the short term. If you’re short on a payment and need to get some money fast, then sell some of your unwanted possessions to raise the cash or do some odd jobs in your neighborhood. You can also find extra work online for some extra money as well.

Even if you are already caught up in the vicious cycle, start budgeting and living within your means. Remember, you can always put that extra ten percent towards the bills you owe to get caught up that much faster.

How It Affects Businesses

Late payment doesn’t just affect our personal lives. It can also affect our businesses as well. For small business owners, one of the biggest problems is getting their customers to pay on time, especially if it’s from big businesses. Big businesses are often late with their payments to smaller businesses, sometimes a full month later than the agreed date in the contract. This interrupts cash flow for the small businesses which makes them late on their own payments and eventually makes them collapse.

In the UK, government policies are being put in place to fight late payments made to small businesses. But there are some things small businesses can do to stop themselves from getting caught up in late payments. First, make sure that it isn’t you holding up the payments by accidentally withholding information. Second, make it easy for them to pay you. Provide all the information they need and if possible provide multiple payment options. Third, take action. Keep calling and emailing the company from the day the payment is due until they pay it. And when all else fails, you can file a lawsuit for breach of contract.

Insurance Guarantees and Indemnities for Credit Controllers

insurance risk

insurance riskWhere risk factors may normally prevent you from trading with a specific firm, requesting security in the form of a guarantee from third party might perhaps provide an answer. With a sole trader or partnerships, liabilities are infinite; nevertheless their financial standing may be such that some form of security is called for. In the case of a limited company guarantees could be requested from a:

•           parent company
•           subsidiary or associated company
•           director’s personal guarantee

Guarantees can cover both trade and retail finance transactions.

Manufacturer’s warranty

The law states that all goods sold must be of merchantable quality and able safely to carry out the tasks they were manufactured to perform. The British Standards Institute ‘kite mark’ symbol confirms that safety guidelines are adhered to. Any guarantee or warranty offered by a manufacturer cannot infringe on the rights the buyer may have under the Sale of Goods Acts.

Banker’s guarantees

Instruments suitable for trade credit are the first and last listed below. With the last item a customer would use their own cheques, arranging for their bank to certify payment by stamping the cheque and signing it; this certification guarantees payment to the supplier. The first item listed is similar to the other method, except the bank uses its own cheques. Other forms of guarantee offered by banks include:

•          banker’s draft
•           travellers cheques
•           eurocheques
•           cheque guarantee cards
•           certified cheques

Whilst it was an exemplary service, certified cheques are rarely seen today, having been replaced by banker’s drafts.

Other forms of guarantee

Of course insurance is a form of guarantee which you can purchase. Standard policy documents affirm that the insurer will reimburse you against loss when certain previously expressed conditions arise. There are forms of guarantees which include:

•           export finance
•           credit insurance
•           insurance to cover redundancy, accident or sickness

Not until the later part of the 19th century were restrictions lifted which prevented companies trading with limited liabilities.

All limited companies in England and Wales must be registered with the Registrar of Companies at Companies House, Cardiff. Information required to be lodged under the varying Companies Acts can be inspected there or in London. This includes:

•           articles of association
•           formation details
•           annual returns — lists of shareholders and directors
•           annual accounts

Details of companies registered in Scotland and Northern Ireland are filed in Edinburgh and Belfast respectively.

Types of companies

Until the Companies Act of 1967 many small companies were classed as exempt companies, which meant they were not required to file annual accounts. However, this Act removed those privileges, and now all registered companies irrespective of size are obliged to file accounts with their annual returns. Now companies fall into two distinct categories.

Public limited company ( Plc)

Subject to meeting the criteria laid down in the Companies Acts Plcs may invite investment from the public, providing they meet the additional regulations of the Securities and Investment Board, Plc shares can be traded on the stock exchange, via broking houses.

Private limited companies

Shares of these companies cannot be openly traded in the same manner as Plcs, but they can be bought and sold by private treaty sale. The rules governing the accountability of smaller and medium sized limited companies change from time to time, but current regulations are available on application from Companies House.

What does an Electrical Engineering do?

The advancement in technologies today has increased the demand of many professions. One particular profession is an electrical engineer, who is responsible for developing and testing products that are powered by electricity. Everything from refrigerators, computers, iPods, and televisions are all built based on the specifications of an electrical engineer.

Electrical engineers go through extensive training before they are considered for hiring in the production world. They require a certain skill set to be a qualified engineer, to include, having a natural knowledge of math, science, and computer skills. These skills are critical during your educational studies as becoming an engineer will require you to take advanced college courses in these fields. In addition, they must have excellent communication skills, as they are often required to talk with customers and other co-workers on specification of system design and operation.

Once they are trained and certified as an electrical engineer they will be able to start putting their skills into use. Some specific job duties that they perform are to design, implement, and improve on electrical devices. This means they are constantly testing and evaluating equipment to ensure they are operating at maximum efficiency, and if there are ways to improve the product implement those processes and make sure all PAT testing is up to date. In addition, engineers often find themselves talking with customers on current products and what they want to see for the future. This means the electrical engineer must discuss ways to improve the current product or facilitate ideas with the customer on how to create a better version of the current product. This is where the communication skill set come into play, poor communication with your co-workers or customers can result in projects not getting completed or not to customer satisfaction.

Another significant job duty for electrical engineers is the role of preparing and studying technical designs and specifications of various electrical systems on devices. To do this you must be able to understand how the device operates when powered by electricity and be able to follow wiring diagrams on a map. This is especially critical for engineers that work on the infrastructure of electrical power grids across the country, which include the power plants, power lines, and relay stations. Along with knowing how the power grids work, engineers will also be tasked to conduct field surveys, maps, and diagrams of the electrical grids and recommend ways to improve efficiency and reducing operating costs.

Senior electrical engineers who have gained experience through the years often find themselves developing budgets, and operating costs for electrical equipment. They are asked to find the cost of how much a device will cost to build, as this will determine how much to sell the product, which directly affects profits for the company. Also, some senior electrical engineers get involved in compiling reports on engineering studies and projects that government agencies or companies are interested in. So thorough background knowledge in all aspects of engineering is needed to be able to compile these types of reports.

Being an electrical engineer is an award career and will continue to be in demand for the foreseeable future. This is a positive trend for prospective engineers looking to make it a career for them.

Venture Capital Myths

There are a lot of avenues for the intrepid entrepreneur to explore when seeking start-up financing for a small business.  Bank loans are the most common, but you might also look into personal loans (from friends and family), a self-directed Roth IRA (financing your business through retirement funds), angel investors, and even business partners.  And of course, venture capital is another possible option.  If you’re having trouble securing a loan for your business in these uncertain times, but you’ve put in the time and effort to formulate a solid business plan (including market research, focus groups, maybe even the creation of a prototype) or even if you’ve already launched your business but you need money for expansion, then venture capital might be a good way to move forward.  However, you’re going to have to overcome some myths before you do. Continue reading “Venture Capital Myths”