Timely funding through updated invoices is important for MSMEs; here’s why

Small and medium-sized enterprises are once again given the opportunity to boost India’s growth engine, in a post-pandemic recovery situation with double-digit GDP growth rates. At the same time, however, the events of the past two years mean that many small and medium sized Indian businesses are running out of cash reserves or have seen those reserves severely depleted, meaning that day-to-day cash flow management is often a challenge, a situation not conducive to accelerated growth. This is exactly why immediate financing is the need of the moment, and bill discounting is one of the best ways to get money into the hands of MSME owners, when they need it, and with savings. minimal long-term financing costs.

Ability to invest in obtaining capital goods, promote sales

In today’s business environment, where liquidity remains insufficient for many Indian companies, the choice between investing in essential capital goods (such as manufacturing equipment, for example) and investing in the working capital necessary to support the sales growth is often a decision. Successful businesses should ideally invest in both.

Invoice Discounting allows small businesses to put extra cash in their hands and provide much needed working capital to promote and encourage sales. This facilitates the decision to invest in capital goods, enables business growth, and ensures that businesses continue to invest in future growth.

Need for greater resilience in the face of market uncertainties

The fact that we are still in a period of recovery in all economies means that for any given company there will be uncertainties about their partners, both up and down the supply chain. What if, for example, an important customer rolls down the shutters and is unable to place one of their regular monthly orders? Or if a supplier of a critical component is unable to meet business needs on time? In these kinds of situations, immediate financing offers small businesses protection against uncertainty without the long-term implications of conventional credit. Invoice discounting could provide the time and flexibility to find a new supplier with immediate payment terms, for example, or sell unsold inventory at a discount while maintaining overall stability.

Invoice rebate can help small businesses

Certain segments of the economy – small companies manufacturing components for the textile industry for example, are very competitive spaces due to the large number of players offering similar products at similar prices. In these situations, any negative variability that might arise due to delays on the supply side or the inability of a small business to meet its deadline commitments could result in the loss of customers and worsening the downtime. cash flow situation. In order to avoid these pitfalls, bill discounting could give small businesses the ability to ‘straighten out’ day-to-day variability, ensuring that they are able to deliver the best quality products to customers, while staying in the business. Thu. Less variability to factor in could mean a better commitment to lead times, fewer product defects, and an overall better customer experience.

We are at a time when the need of the moment for small businesses in India is quick and reliable access to capital, with favorable financing terms. This access will allow them to source the equipment and supplies they need, communicate with customers and prospects, provide a better customer experience, and much more. Supply chain finance offers what appears to be the best balance of speed, access and cost of borrowing to meet this immense need.

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Posted on: Saturday December 18, 2021 3:37 PM IST


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