The three credit rating agencies – Moody’s Investors Service, Fitch Ratings, and Standard & Poor’s (S&P), were met separately by finance secretary Cesar Purisima when he went to New York and Washington D.C. recently.

Purisima presented fiscal and monetary data on the Philippines that he believes would encourage them to review and increase the country’s credit scores. Philippines is rated three notches below investment grade by Moody’s and two notches below by Fitch and S&P.

He also said the country has a credit score lower than Indonesia yet the fiscal situations of the two countries are just the same. Purisima also cited the country’s declining debt-to GDP [gross domestic product] ratio and deficit-to-GDP ratio. “Our debt rations and deficit are declining and our financial sector is well managed, and so we deserve better ratings,” he said.

During the meeting with the credit rating firms, Purisima said the three did not give a hint if they would change the country’s credit ratings soon, but he express optimism that the Philippines would finally get an investment-grade credit rating before the end of Aquino’s term.

The finance chief said the country has been able to borrow from the international markets at interest rates comparable to those applied to financing initiatives by investment-grade rated countries. Still, he stressed that getting a credit rating upgrade would be important in getting more foreign investments for the Philippines. “Much more funds will come in to the Philippines if we get investment grade,” Purisima said. He noted that some big-ticket business ventures have been using credit ratings in their decision-making.

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Financial experts acknowledge the growth of OFW remittances, especially this coming Christmas season, as the main reason for the steady appreciation of the Philippine peso against the US dollar. A currency trader said more dollars will continue to flow into the emerging markets, including the Philippines.

The Bangko Sentral ng Pilipinas (BSP) said it see the amount of remittances by Filipinos abroad to grow by 4% to a record $17.1 billion this year from $16.4 billion in 2008.

From January to September, the money sent home by OFWs inched up by 4.2 percent to $12.789 billion, compared to $12.273 billion registered for the same period last year. In September alone, remittances jumped by 8.6 percent to $1.446 billion from $1.332 billion in the same month last year.

Inflation, on the other hand, climbed to a six-month high of 2.8 percent in November from its previous level of 1.6 percent in October. This was due to high food and oil prices. But the BSP said it is still well within the target they set. The agency sees inflation averaging between 2.5 percent and 4.5 percent this year, but emerging figures show that consumer prices is likely to average 3.23 percent this year.

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Lacson added that although there is an existing price control, most businesses would be able to recover, but they will be having difficulty should the price ceiling on basic goods lasts for more than a year. “There must be a balance,” he said.

The government imposed the nationwide price control when the country was placed under a state of calamity last October 2. The price ceiling on basic goods was even said to be extended until the state of calamity is lifted.

However, Press Secretary Cerge Remonde said President Gloria Macapagal-Arroyo no longer sees the need for a nationwide imposition of price control since the market situation has returned to normal. The state of calamity in Visayas and Mindanao was lifted last week.

Luzon is still under a state of calamity though, because Metro Manila and several other provinces are still under rehabilitation. But Remonde assured that this won’t last for a year (as earlier reported), and would most likely be lifted in December.

Donald Dee, PCCI chairman emeritus Ambassador, warned that if the price control would be imposed for a year, businesses would be suffering losses and the effect is that they might cut the number of their employees. “We will follow the law for as long as we can, but we cannot operate when we are already losing money,” he said.

Dee said he is not sure if PCCI members can freeze the prices of their goods for long.

“If they (businessmen) are asked to hold prices for a year, it might lead to other problems like supply shortage and job losses,” he said, adding, “We will do consultation over this. All of us are trying to help the victims but the prices will not be able to move for a year then there will be suppliers who will be unwilling to deliver.”

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The heavy rains the Ondoy brought to the country last September 26 has caused massive flooding in Metro Manila and nearby provinces, which took the lives of more than 300 people and affecting over 3 million residents. Hundreds of cars were submerged in flooded communities, while big factories were also damaged by floodwaters.

The amount of claims however, is expected to increase once the claims for damages attributed to typhoon Pepeng are added. “It is one of the largest pay-outs in recent history for the country’s non-life insurance industry,” said Pedro Benedicto Jr., vice chairman of the PIRA’s ad hoc committee for post calamity response, and also the president of Republic Surety Inc.

The ad hoc committee is composed of representatives from the non-life insurance companies and the Insurance Commission (IC), which is tasked to respond to the recent disasters, brought about typhoons Ondoy and Pepeng.

PIRA said its members are capable of dealing with the claims using their own funds. Insurance companies also get insurance from reinsurance companies as a precaution to bigger claims beyond company reserves. “We (PIRA members) have a combined net worth of P57 billion at the start of the year,” Rellosa said.

PIRA’s membership is composed of 86 non-life insurance industry in the country.

Prior to the recent calamity, the two biggest non-life insurance payouts in recent history were recorded after the 199 earthquake and the 1991 Mt. Pinatubo eruption.

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The trade department will be coordinating with the Department Of Energy about the matter, while it says that it hasn’t received any complaints so far. Earlier, DTI has rounded up on dozens of supermarkets and shops who were found violating government-imposed price controls.

DTI Assistant Secretary Angel Pelayo said they already visited some hardware stores to check on the prices of construction materials and steel products and hasn’t seen any violations yet. “In fact, some of the construction materials are being sold below the standard retail price (SRP),” Pelayo said.

Originally, the price control only covers basic goods like rice, noodles and sardines. But the government decided to include construction materials in the list to help victims whose houses were damaged by the recent typhoon.

Meanwhile, Pelayo said that some manufacturers were complaining the prices imposed by the government were too low, but in spite of that, sellers were complying.

Jesus Arranza, Federation of Philippine Industries president said, “There may be some mistakes in the SRP for construction materials because the published price is below the selling price before the calamity.” He, however, assured that despite their misgivings, suppliers would comply with the government imposed SRP.

He pointed out that businessmen do not intend to take advantage of the situation and that all they wanted was a chance to sell their products at pre-calamity prices. “There is room for adjustment in the prices. I believe there must be some mistake,” he said.

According to Arranza, prices of construction materials vary depending on the demand in specific places. He also said that it is not realistic to expect businessmen to sell their products at a loss.

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It’s dubbed as the biggest and grandest taxpayers’ recognition event of the city, which is now being staged on its seventh year. It will be the last time it will be held under Mayor Feliciano Belmonte Jr., who will be completing his third term as QC head on June 30 next year.

Leading this year’s testimonial dinner are Mayor Belmonte, Vice Mayor Herbert Bautista, city treasurer Victor Endriga and the members of the city council will lead this year’s tribute to the top taxpayers at the Grand Ballroom of Crowne Plaza Galleria.

City administrator Paquito Ochoa, who is also the chairman of the QC foundation anniversary executive committee said, “It will be the biggest and the grandest of the yearly awarding ceremonies for the Quezon City’s top taxpayers.” The awarding ceremony this will cover all types of business organizations in line with Belmonte’s goal to recognize more than the usual top 20 corporate taxpayers in the city.

The SM Group of Companies, Manila Electric Co., ABS-CBN Broadcasting Corp., Mercury Drug Corporation, GMA Network Inc., Araneta Group of Companies, Jollibee Foods Corp., Pacific Paint (Boysen) Philippines, IBM Philippines and Citibank, N.A. are among the awardees who have consistently topped the list in the business category for the past five years. Because of that they’ll be earning the title “QC’s Premier Business Taxpayers.”

Aside from the above, 15 more companies will be recognized as top taxpayers in business category for fiscal year 2008. These include Maynilad Water Services, Golden Arches Development Corp. (McDonalds), Nestle Philippines, The Coca Cola Co., and Robinsons Land Corp., among others.

Elevated to QC’s Prime Real Property Taxpayers are SM Prime Holdings, Araneta Group of Companies, Ayala/North Triangle Depot Corp., Robinsons Land Corp., Megaworld Corp., ABS-CBN Broadcasting Corp., Philippine Long Distance Telephone Co., GMA Network Inc., Manila Electric Co., and Nestle Philippines.

Other awardees in the real property category for fiscal year 2008 are Metropolitan Bank and Trust Co., Bangko Sentral ng Pilipinas, Phinma Property Holdings, Pilipinas Makro, Banco de Oro Universal Bank, and 10 more companies.

There are 60,000 business establishments and 400,000 real property taxpayers in Quezon City to day. Their contribution in taxes earned for the city the prestige and recognition of being the richest local government unit in the country for the past six years.

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Santiago even illustrated an example, when a private entity donated brand new computers worth P500,000, it may claim a P750,000-deduction from its taxable gross income.

The program was established through Republic Act 8525, in order to encourage private entities to help the government address the public school system’s severe resource shortages.

Aside from computers and other modern instructional technologies, Santiago said other qualified contributions may also be in the form of support for the development of the faculty, construction and upgrading of school facilities, and the provision of textbooks and other teaching materials.

In claiming for deductions, the contributions, aside from cash, would be valued based on the acquisition cost or purchase price of the property, equipment, materials, and services supplied. But for used properties such as donations of second-hand computers, their valuations would be subject to depreciation.

Santiago further added that members of the Business Processing Association of the Philippines and the Contact Center Association of the Philippines “should contribute in big way to the advancement of computer literacy and school connectivity.” He also pointed out, “highly computer-literate and Internet-savvy young people are needed to enable the future human resources required by BPO providers.”

Meanwhile, a total of P1.1 billion has been allotted to provide Internet connectivity to 9,048 public elementary and high schools all over the country, according to Santiago.

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Included in his bill is the proposal to impose a penalty of six percent interest per year on the un-remitted portion of the IRA against the national government in order to discourage any delay in the release of the much-needed funds.

Escudero said, “The law provides for local government units to get their rightful share of the taxes and other revenues the national government collects or generates, thus ensuring provinces, cities, towns and barangays a specific amount to fund their operations.”

The proposed bill is said to augment the current share of LGUs in the national internal revenue taxes base on the new formula using the current share of 40 percent as provided under the Local Government Code. It will augment by an additional 50 percent of the difference between the tax collections of the third and second fiscal years preceding the current fiscal year.

Citing an example, the bill said if the total national revenue collection for 2007 is P800 billion and for 2008 is P900 billion, another P50 billion will be added to the 40 percent IRA of LGUs under the current fiscal year. the resulting IRA will then be remitted to the different provinces, cities, and municipalities in shares that correspond to their income, land area, and population.

The bill also seeks to protects LGUs having difficulty raising revenues by providing that regardless of the collections made, it will continue to receive 40 percent of its IRA share. “Instead of penalizing the poor LGUs, we should ensure adequate support for its constituents.”

One salient provision in the bill that Escudero wants to be noted is that, it commands LGUs that 10 percent of the IRA it will be getting from the national budget should be solely devoted to programs and projects concerning jobs, income generation, and livelihood.

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It was seconded by Melinda Mercado, Philhealth SVP for operations, who said, “We’re able to pay premium. It’s strong and stable, don’t worry.”

In a Senate hearing on Wednesday, Philhealth VP for actuary Nerissa Santiago said that the national government owed the government corporation some P19.2 billion in unpaid contributions to members. This rose concern from Sen. Loren Legarda, chair of the health committee that heard a bill providing insurance for Filipinos. She wondered how the government racked up such debt to cause Philhealth’s bankruptcy.

Andaya made a clarification on the issue. He said, per Philhealth’s computation, the DBM owed P9 billion to the corporation, but as per DBM’s computation, it owed Philhealth a smaller amount. “And this is now the subject of talks,” he said, “they have their own computation, we have our own computation.”

Mercado said, the DBM remitted some P388 million in 2006, and P85 million in 2007, and some P610 million has been appropriated from the 2009 national budget for release to Philhealth. “Those are projections or assumptions, assuming there’s no effort to increase collection,” she said of the reported P19.2 billion arrears by the national government to Philhealth.

The national government pays a counterpart premium to Philhealth for government employees.

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Usually, businesses have receivable or those what the customers owe to you. Difficulty collecting payments from these receivables can affect your outstanding accounts as it will bleed out your cash flows. Late payers of receivables are in fact lending your money while being free from interest rates.

Unknowingly, the failed payment of receivables gain the business cost which are not obvious. The uncollected receivables could have been placed in money market instead. Or, these receivables cost you to miss other opportunities which might give you additional income.

Every business must be aware of their receivables or the customer’s credit profile. Dividing the sum of the credit sales to the average receivable balance is the first step to do to identify your average collection period. To better explain this, look at the example.

• If you have a total sale of 4.5 million with 3.5 million of it on sales account. Then you have 6.5 million as receivable account at start of the month and at 4.5 million at month end. This is how you can compute for your receivable turnovers.

3.5M (sales on account) / 5.5M (starting receivable account (6.5M) plus month end receivable account (4.5M) divided by 2.

The result from this will be 0.6. Divide the number of the months by the result that you get to determine your average collection period days.

30 days / 0.6 = 50 days (your average collection period.

If you have a normal credit term of 30 days subtracted from your actual collection average collection of 50 days, you will have 20 days collection overdue. Multiply this by your daily sales to come up with your total uncollected accounts receivable.

20 x 116666(3.5M divided by 30 days) = 2,333,333(uncollected account receivable)

By multiplying that figure with by the normal rate of return from your business, the amount you will come up with is the cost of the overdue accounts.

Shortening the average collection period will make you manage your cash flow better. To decrease your credit sales, you can apply a stricter credit policy. You can also strengthen your collection efforts to lower your receivable balance. Prioritize your collection efforts focusing more on small accounts with its higher possibility of being collected. Legal actions can be taken against customers with uncollected overdue account.

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Every business needs an accounting to determine the inflow and outflow of finances. It would best if the owner himself has his own eyes in the accounting of his own business. But it is not necessarily that the owner himself would do the accounting, rather knowledge on the basics of accounting and the ability on interpreting financial statements is all you need. Regular involvement in the work of the bookkeeper who manages your finances will result to better accounting. Accounting should be done on a daily basis, weekly basis and on a monthly basis.

Daily accounting is done to have the summary of the sales and cash receipts of the day. Daily sales could be the combination of cash sales from complete transactions and from what the customers owe you (receivables). You should have the cash position report reviewed. Cash position report is the record of all the cash ins and outs for the day. Make sure that at the end of the day, the cash on hand and the bank balance are all accounted for. Some adjustments should be done in recording the amount if ever the cash is not on hand or is not deposited on the bank because it was used to pay salaries or other expenses.

Weekend accounting is done to prepare the amount of money that will be needed for expenses such as payroll for the upcoming week, VAT payments and withholding taxes. Payables especially those with cash discounts and those affordable should be done to avoid upset on the suppliers. With the budgeted payments, you will then have the idea of how much money you will need to achieve from the cash sales and from the receivable collections.

Also, through weekend accounting you will be able to identify customers who are not paying on time their receivable accounts. You can have their attention regarding this matter by calling them, visiting or writing them letters.

Monthly accounting will give you an overview on how the business is doing and if necessary adjustments such as price increase or reduction of overhead expenses to increase the income should be done. Performance of the bookkeeper should be reviewed to find out if she has posted on the general ledger all the journal entries with their proper classifications. Once the journal entries have been checked, the bookkeeper should have an income statement readily available 10 to 15 days after the last day of the month.

Aside from the accounting, other things that should be given proper attention in business include:

• Balance sheet- this where you can review the company’s financial condition. With the use of the balance sheet, how much assets including the fixed assets and the liabilities to suppliers and banks are compared to the invested capital. Proper adjustment of the two accounts, the bank balance and the cash account, should be done if any timing differences occur.
• Regular cash count- this is done to check if the petty cash and the total amount of paid slips will fit the budget you have for the month. Surprise cash count can be made to find out if your cashier is honestly maintaining petty cash in the box.
• Tax Payments- ensure that withholding taxes deducted from salaries and VAT payments are remitted accordingly. VAT computations and remittances are done based on the legally declared sales and expenses.

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