More than half of the B2B payments in India received past due date and 2.4% are uncollected. But in this new digital age, it is just a click away to find the right and effective digital platforms for businesses to collect customer dues easily. Small businesses in India have stayed small for decades and the time has come for these entrepreneurs to grow faster with the aid of technology and the internet. In conversation with Mr. Winny Patro, Co-Founder and CEO, Recordent, who’s vision is to boost the MSME and SME sector in India share more insights on the same.
- What is the delayed payment scenario & its impact on the SME and MSME community?
For a long time, MSMEs have been facing a financial crunch which is a major hindrance in growth. Delayed payments are one of the major factors that derail the progress, and sometimes even the day-to-day operations of a small business. The major part of the MSME sector is caught up in the vicious cycle of delayed payments causing stressful environment affecting the business growth. Most of the MSMEs spend lot of time and resources on collection of dues which are generally not paid on-time. Often, company founders, directors, owners, and staff spend a considerable amount of time collecting dues. This is an unproductive use of resources. Spending that time and resources on sales or business expansion would definitely contribute to growth and job creation.
However, in a real-world scenario, companies may only just survive with this problem of delayed payments, but growth will be hampered. It is a delicate problem to tackle as it would affect business relationships. As a seller, sometimes you are helpless but listen to responses that may not even sound reasonable.
“Our approval authority is not in town, we will get back to you next week” – हमारा अनुमोदन प्राधिकरण शहर में नहीं है, हम अगले सप्ताह आपको भुगतान करेंगे
“This month’s business is low, we can only pay you next month” – इस माह के व्यापार कम है, हम केवल आप अगले महीने भुगतान कर सकते हैं
“There is a problem in our accounting system, we will pay once it is sorted” – हमारे accounting system में एक समस्या है, हम इसे हल करने के बाद भुगतान करेंगे
Often, customers are not motivated to pay on-time for various reasons, including that they may not be getting paid on time. To mitigate the loss associated with late & default payments, companies build the overdue and non-payments margin in their pricing and pass it on to their customers. In all cases, the impact of delayed payments is undeniable, affecting cash flows, delaying the payments to other dependents like suppliers, vendors, and employees. Sometimes, it is just a write-off. One of the reputed companies in trade credit insurances states in its recent report that 58% of B2B payments in India are received past due date and 2.4% are uncollected (written off). It is estimated that over 80% of businesses that are shutting down due to cash flow problems. Overall, the network effect is so huge that it creates unrest among a significant number of institutions in MSME sector.
Primarily, it should be in the interest of MSME to adopt the best practices to deal with customer due collections and have better credit management practices. With small-sized and semi-organized nature of MSMEs, it is important to prioritize time they spend on different functions of the business. In this new digital age, it is just a click away to find the right and effective digital platforms for businesses to collect customer dues easily. This would help MSMEs immensely to increase the time spent on sales and growth
Several government initiatives and private players have emerged to aid MSMEs with solutions that help collect payments faster and thus fix the delayed payment cycles for the industry.
- What are the different technologies that can be used by SME’s and MSME’s to boost their business?
Many Small businesses have yet to adapt to technology in running their businesses. Accounting software’s and lately fintech payments are an exception. The new age technology solutions offer far more features with user-friendly interface. Majority of the SMEs operate on credit which demands an effective credit management software which works like a credit control department in larger organizations. There are organizations like us which offer end-to-end credit management technology solutions to reduce credit risk and improve collections. Another important aspect is customer relationship management for SMEs who are aspiring to grow beyond their boundaries of familiarity, there are many cost-effective CRM softwares available in the market.
- What are your growth and expansion plans? Any plans of expanding your portfolio?
Our plan for the next 12months is to cater to at least 30,000 sellers and at least 1,00,000 buyers, and empower their financial well-being and fuel their growth. Over the last 12months, we have transitioned from finding SMEs for our product to finding products for SMEs. So, we will keep looking out to build solutions which solve problems for SMEs.
- What is the market opportunity you see in India?
Small businesses in India have stayed small for decades and the time has come for these entrepreneurs to grow faster with the aid of technology and the internet. Every small entrepreneur has witnessed the power of technology in the consumer tech revolution. They have now started thinking of using technology in their businesses also. With 6.4 million businesses, the number largely dominated by Micro enterprises will see a tremendous growth. We will witness many micro enterprises growing to become small and medium businesses in the next 2-3 years. And the level of growth anticipated is very much possible if businesses start adapting to technology.
- What Data Analytics technology is used by Recordent to help their customers enable better businesses?
Our data analytics solution is built on Power BI tool from Microsoft. The solution offered by Recordent helps businesses in the following:
- Analysis about customers/buyers to understand the behaviour and trends
- Sales analysis at customer level and at invoice level
- Collections analysis on overdue at customer level and at invoice level
- Analysis on payments received at customer level and at invoice level
SMEs which are using tally accounting software can immediately start using this feature on Recordent through it’s tailor-made tally plug-in. Other accounting software’s are also supported through a custom-mode support.