Re: Request for guidance - Setting up Salary Loan Products for a B-to-B-to-C Environment

[Binny Gopinath Sreevas <bi...@gmail.com>]

Hi Vinayak,

Nothing specific comes to mind without understanding fully your use cases.

Isn't it possible to setup your partners as offices - and allowing their
staff to update the loan repayments themselves directly into Fineract? Why
offices - because then you can ensure that one partner company's data is
not mixed up with another partner company's data. This way - they would be
able to respond themselves to queries from their employees regarding
account statements, loan balance, repayments etc.

And / Or have a custom upload of repayments via a CSV or Excel file upload
for capturing repayments from companies.
Do feel free to reach out to me if you would like to discuss more.

Thanks
Binny



On Thu, May 28, 2020 at 5:13 PM Vinayak Javaly <vi...@urgent.vc> wrote:

> Hi Binny.  Thank you very much for your detailed responses.  Do you have
> any other advice related to using Fineract for our use case?
>
> Thanks,
> Vinayak
>
>
> On Thu, May 28, 2020 at 1:23 AM Binny Gopinath Sreevas <
> binny.gopinath@gmail.com> wrote:
>
>> Hi Vinayak,
>>
>> To answer your questions:
>>
>> 1) The decision whether to use Cash based or Accrual based accounting is
>> purely based on your organization's policies and you will need to take the
>> decision based on discussions with your accountants or finance persons -
>>          Cash based - interest income is recognized as an income (i.e.
>> accounting entries for income is passed by the accounting module) only when
>> cash is received on the repayment i.e when customer makes a repayment. And
>> not when the installment is due. Example: On an installment that is not
>> paid by the customer, the income is never accounted. For a late payment -
>> the income is accounted only on the payment date and not on the due date.
>>          Periodic Accrual - Interest income is recognized on due date and
>> accounting entries for income are made by the accounting module along with
>> a receivable (asset) also being increased. On the payment date (could be
>> the same as or after due date), the receivable is reversed and loan
>> portfolio is decreased.
>>          Upfront Accrual - All interest (full interest for the entire
>> period of the loan) is accounted upfront. I am not sure which countries
>> would follow such an approach, but to me, this does not seem to be a
>> standard way of accounting. Example: a loan given at the end of a financial
>> year, will have all income accounted in the financial year - whereas all
>> collections may happen only in the next financial year.
>>
>> 2) Fineract allows backdated transactions, provided you do not "close"
>> your accounting. Assume that installment is due on 7th - and you the
>> company informed you of the payments only on 10th and today is the 12th.
>> You could still make an entry in Fineract for the 7th. If you had done an
>> "accounting closure" for the 8th - then system will not allow you to do
>> transactions prior to 8th. For the loan product - you could set up a grace
>> period ("Number of days a loan may be overdue before moving into arrears" -
>> of say 7 days or 10 days) - so that the loan is not shown as In Arrears on
>> 8th and is shown as arrears only after the grace period expires.
>>
>> 3) If you are manually applying late fees, then yes you should backdate
>> the fees. If you are allowing Fineract to calculate and apply automatically
>> - I do not believe there is a way to give a grace period for overdue
>> charges. So in the above example - the overdue charges may get applied on
>> 8th. I am not entirely certain on this - you may need to test this behavior
>> in Fineract to see if Overdue Charges take into consideration the Loan
>> Product level Grace Period. So the charges may need to be manually reversed
>> if you do not wish to collect the overdue charges. I have found it hard to
>> use the overdue charges for various business scenarios. Hence, please test
>> various scenarios before using in production.
>>
>> Hope this helps.
>>
>> Thanks
>> Binny
>>
>>
>>
>> On Wed, May 27, 2020 at 10:15 PM Vinayak Javaly <vi...@urgent.vc>
>> wrote:
>>
>>> Hello.  I'm working for a company in an emerging market that offers
>>> salary loans to employees through their employers.  I'm looking
>>> for guidance on best practices on setting up Fineract for this use case.
>>>
>>> Here's our scenario:
>>> 1) My company disburses the loan amount to the borrower (company
>>> employee) directly.
>>> 2) The employer deducts the appropriate repayment amount from the
>>> employee's salary on their payroll cycle.
>>> 3) Sometime after the payroll cycle, the employer sends us the sum of
>>> all these payroll deductions and a statement listing each employee's
>>> payroll deduction amount.  If the employee has left this company, this
>>> information is also passed to us.
>>>
>>> These are the types of questions I have:
>>>
>>>    1. Should I use cash accounting or accrual accounting (periodic or
>>>    upfront) for the loan product?
>>>    2. Since we do not find out if a borrower has made a loan repayment
>>>    on its due date, how should we handle this time lag?  Should I set a grace
>>>    period in the loan product to the number of days before I expect the
>>>    employer to send the funds and repayment info?
>>>    3. If a loan repayment is missed, should I back-date the late fee
>>>    charges?
>>>
>>> If it's easier to speak about this, I'd be happy to have a call.
>>>
>>> Thanks in advance.
>>>
>>> Vinayak
>>>
>>

Re: Request for guidance - Setting up Salary Loan Products for a B-to-B-to-C Environment

[Vinayak Javaly <vi...@urgent.vc>]

Hi Binny.  I've thought about the idea you are proposing, setting up each
customer as an office.  FYI, the only people directly interacting with
Fineract will be my company's employees.  We will provide our customers
(companies) with a portal where they can only see data on their employees.
This portal will combine info from Fineract with data from the CRM we are
developing.

I think it would be helpful if we could speak further about our
implementation and how we plan to incorporate Fineract.  When is a good
time to speak?   For your time planning purpose, I'm based in NYC.

Thanks in advance.

Vinayak

On Mon, Jun 1, 2020 at 2:36 AM Binny Gopinath Sreevas <
binny.gopinath@gmail.com> wrote:

> Hi Vinayak,
>
> Nothing specific comes to mind without understanding fully your use cases.
>
> Isn't it possible to setup your partners as offices - and allowing their
> staff to update the loan repayments themselves directly into Fineract? Why
> offices - because then you can ensure that one partner company's data is
> not mixed up with another partner company's data. This way - they would be
> able to respond themselves to queries from their employees regarding
> account statements, loan balance, repayments etc.
>
> And / Or have a custom upload of repayments via a CSV or Excel file upload
> for capturing repayments from companies.
> Do feel free to reach out to me if you would like to discuss more.
>
> Thanks
> Binny
>
>
>
> On Thu, May 28, 2020 at 5:13 PM Vinayak Javaly <vi...@urgent.vc> wrote:
>
>> Hi Binny.  Thank you very much for your detailed responses.  Do you have
>> any other advice related to using Fineract for our use case?
>>
>> Thanks,
>> Vinayak
>>
>>
>> On Thu, May 28, 2020 at 1:23 AM Binny Gopinath Sreevas <
>> binny.gopinath@gmail.com> wrote:
>>
>>> Hi Vinayak,
>>>
>>> To answer your questions:
>>>
>>> 1) The decision whether to use Cash based or Accrual based accounting is
>>> purely based on your organization's policies and you will need to take the
>>> decision based on discussions with your accountants or finance persons -
>>>          Cash based - interest income is recognized as an income (i.e.
>>> accounting entries for income is passed by the accounting module) only when
>>> cash is received on the repayment i.e when customer makes a repayment. And
>>> not when the installment is due. Example: On an installment that is not
>>> paid by the customer, the income is never accounted. For a late payment -
>>> the income is accounted only on the payment date and not on the due date.
>>>          Periodic Accrual - Interest income is recognized on due date
>>> and accounting entries for income are made by the accounting module along
>>> with a receivable (asset) also being increased. On the payment date (could
>>> be the same as or after due date), the receivable is reversed and loan
>>> portfolio is decreased.
>>>          Upfront Accrual - All interest (full interest for the entire
>>> period of the loan) is accounted upfront. I am not sure which countries
>>> would follow such an approach, but to me, this does not seem to be a
>>> standard way of accounting. Example: a loan given at the end of a financial
>>> year, will have all income accounted in the financial year - whereas all
>>> collections may happen only in the next financial year.
>>>
>>> 2) Fineract allows backdated transactions, provided you do not "close"
>>> your accounting. Assume that installment is due on 7th - and you the
>>> company informed you of the payments only on 10th and today is the 12th.
>>> You could still make an entry in Fineract for the 7th. If you had done an
>>> "accounting closure" for the 8th - then system will not allow you to do
>>> transactions prior to 8th. For the loan product - you could set up a grace
>>> period ("Number of days a loan may be overdue before moving into arrears" -
>>> of say 7 days or 10 days) - so that the loan is not shown as In Arrears on
>>> 8th and is shown as arrears only after the grace period expires.
>>>
>>> 3) If you are manually applying late fees, then yes you should backdate
>>> the fees. If you are allowing Fineract to calculate and apply automatically
>>> - I do not believe there is a way to give a grace period for overdue
>>> charges. So in the above example - the overdue charges may get applied on
>>> 8th. I am not entirely certain on this - you may need to test this behavior
>>> in Fineract to see if Overdue Charges take into consideration the Loan
>>> Product level Grace Period. So the charges may need to be manually reversed
>>> if you do not wish to collect the overdue charges. I have found it hard to
>>> use the overdue charges for various business scenarios. Hence, please test
>>> various scenarios before using in production.
>>>
>>> Hope this helps.
>>>
>>> Thanks
>>> Binny
>>>
>>>
>>>
>>> On Wed, May 27, 2020 at 10:15 PM Vinayak Javaly <vi...@urgent.vc>
>>> wrote:
>>>
>>>> Hello.  I'm working for a company in an emerging market that offers
>>>> salary loans to employees through their employers.  I'm looking
>>>> for guidance on best practices on setting up Fineract for this use case.
>>>>
>>>> Here's our scenario:
>>>> 1) My company disburses the loan amount to the borrower (company
>>>> employee) directly.
>>>> 2) The employer deducts the appropriate repayment amount from the
>>>> employee's salary on their payroll cycle.
>>>> 3) Sometime after the payroll cycle, the employer sends us the sum of
>>>> all these payroll deductions and a statement listing each employee's
>>>> payroll deduction amount.  If the employee has left this company, this
>>>> information is also passed to us.
>>>>
>>>> These are the types of questions I have:
>>>>
>>>>    1. Should I use cash accounting or accrual accounting (periodic or
>>>>    upfront) for the loan product?
>>>>    2. Since we do not find out if a borrower has made a loan repayment
>>>>    on its due date, how should we handle this time lag?  Should I set a grace
>>>>    period in the loan product to the number of days before I expect the
>>>>    employer to send the funds and repayment info?
>>>>    3. If a loan repayment is missed, should I back-date the late fee
>>>>    charges?
>>>>
>>>> If it's easier to speak about this, I'd be happy to have a call.
>>>>
>>>> Thanks in advance.
>>>>
>>>> Vinayak
>>>>
>>>