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The Essence Of Online Over The Traditional Based Approach For Bills Payable & Receivables

By Sundeep Mohindru, Promoter Director, M1XChange

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Sundeep Mohindru, Promoter Director, M1XChange

Gurgaon headquartered M1Xchange is an Online National Exchange for Trade Receivables Discounting System and others. A chartered accountant by profession with more than 18 years of experience, Sundeep aims to achieve remarkable customer, employee and stakeholder satisfaction

A fabricator supplying goods to a White goods manufacturer receive payments as per credit terms, normally in range of 90 days from delivery of goods to the manufacturer. Fabricator normally has a manufacturing time lead of 45 days and has to invest in cost of production for 45 days. The total working capital requirement there­fore required to deliver the output is in range of 135 days cost of production. This working capital is managed by the fabricator from working capital bank, basis his goodwill and collateral he can furnish. The collateral always falls short of loan requirements and therefore he has to manage his working capital partly from bank and partly borrowing from private sources. Rate of interest offered by bank to MSME is in range of 10 percent -12 percent p.a. and from private borrowers in range of 15 percent-18 percent p.a. By getting his invoices discounted on M1Xchange, MSME fabricator will get his full payment on delivery of goods and services to white goods manufacturer, thereby reducing working capital requirement from 135 days to 45 days approximately. The rate of interest charged for discounting the invoice is in range of 8 percent -10 percent p.a. which is at least 4 percent  5 percent low­er than his average current borrowing cost. Also, he reduces the risk of collection of sales proceeds from White goods manufacturer by getting his invoice discounted.

"Traditional business models are re-discovering themselves with usage of technology and on same lines the customer is more informed and smart"

The premise of the M1Xchange is based on ‘connected’ supply chain is to break the silos between the functions (MSME fabrica­tor, White goods manufacturer and financier Bank) and interconnect them in order to im­prove visibility of the product as it moves in the supply chain from sourcing of raw mate­rials to consumption of the final product and its cash flow.

Optimizing Resources to Increase the Efficiency of an Organization
TReDS being a digital platform enhanc­es the speed of making the finance avail­able to MSMEs PAN India, and the decision making by the financier is simplified as the transaction between buyer and sup­plier is transparently reflected on the platform.

The major advantage of being an online national exchange is cen­tralised System, which facilitates Buyer, Supplier & Financier to come on same the platform with one agree­ment binding all stakeholders. The approval of invoice by buyer enhanc­es transparency of transaction and their commitment. The ease of use is very high for the financiers as trail of the transaction is online and involve­ment of manual labour is limited to approving the transaction on the ex­change. The connect with the custom­er is online, thereby reduces the time for financing transaction to few min­utes in a day. This being cost effective also provides financiers access to a MSME client base without any additional cost and infrastructure for on boarding.

We infer that, ‘connectedness’ is synonym to the word ‘online’. Efficiency in the organisation is bound to increase where all the parties are connected on an online platform performing their tasks with transparency.

Creating Disruption in the Industry
The small enterprises need liquidity to negate the anomalies in manag­ing the supply chain finance which is facilitated by the robust platform of M1Xchange. With the aid of M1X­change’s Invoice Discounting facility, the companies can get their invoice converted and receive payments against them from financiers in three days.

Here are some advantages of online national exchange for receivable and payable –

1. Minimum cost
2. Much faster turnaround than un­conventional supply chain financing facilities
3. No manual paperwork for transaction
4. Security of digital platform
5. Minimise the duplicate payments and other operational risks
6. Can be integrated with ERP sys­tems and avoid manual processes

TReDS is going to disrupt the MSME ecosystem, as the exchange allows MSMEs to post their receiv­ables on the electronic platform and get them financed. This will not only give them access to finance but also de-risk their business.

As an automated system driven platform, TReDS is expected to ben­efit MSMEs by facilitating them to auction their trade receivables at competitive market rates through transparent bidding process on the platform by multiple financiers. This will help not only quick realisation of receivables but also appropriate price discovery.

The Future of Online Platforms
Globally the phenomena of transact­ing business have changed. Online process has connected the buyer and seller transparently. The speed of business, cost of doing business has come down with a simultaneous expansion in reach to customers. The change in human behaviour has already happened and we are going to see exciting times ahead with this change. Traditional business models are re-discovering themselves with usage of technology and on same lines the customer is more informed and smart.

The companies shall be open to adapt to newer processes and tech­nologies and be with the time to re­main competitive. They should part­ner with robust service providers to ensure smooth transition.

SMEs are the backbone of our economy for growth and employ­ment. Every business needs finance and, the model of M1Xchange for Invoice Discounting is unique, as it is digital and enables the reach of fi­nance to MSME in any region in India. It manages many to many relation­ships on the digital platform thereby enhances the transparency and ef­ficiency of the business. It opens up umpteen possibilities of financing at competitive rates and increases the speed of doing business and contrib­utes to accelerate its growth. As this is governed by RBI, it is safe, quick and hassle-free.

We are proud to contribute in the vision of Government of India for pro­motion of MSME and support the de­velopment of Nation.

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