More than half of B2B payments in India were received late and 2.4% are not collected. But in this new digital era, it only takes a click to find the right and effective digital platforms for businesses to easily collect dues from customers. Small businesses in India have remained small for decades and now is the time for these entrepreneurs to grow faster through technology and the internet. In conversation with Mr. Winny Patro, Co-Founder and CEO, Recordentwhose vision is to boost the MSME and SME sector in India, shares more information on the same topic.
- What is the late payment scenario and its impact on the SME and MSME community?
For a long time, MSMEs have been facing a financial crisis which is a major obstacle to growth. Late payments are one of the biggest factors that derail progress, and sometimes even the day-to-day operations of a small business. Most of the MSME sector is caught in the vicious circle of late payments causing a stressful environment affecting business growth. Most MSMEs spend a lot of time and resources collecting dues which are usually not paid on time. Often, founders, directors, owners, and company staff spend a considerable amount of time collecting dues. This is an unproductive use of resources. Devoting that time and resources to sales or business development would certainly contribute to growth and job creation.
However, in a real scenario, businesses might just survive with this late payment problem but growth will be hampered. This is a tricky issue to address as it would affect business relationships. As a salesperson, you are sometimes helpless but listen to answers that may not even sound reasonable.
“Our approving authority is out of town, we’ll get back to you next week” – हमारा अनुमोदन प्राधिकरण शहर में नहीं है, हम अगले सप्ताह आपको भुगतान करेंगे
“Business this month 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 paid on time. To mitigate the losses associated with late payments and defaults, companies build the late and non-payment margin into their pricing and pass it on to their customers. Either way, the impact of late payments is undeniable, affecting cash flow, delaying payments to other dependents like suppliers, vendors and employees. Sometimes it’s just a countdown. One of the reputed credit insurance companies states in their recent report that 58% of B2B payments in India are received after the due date and 2.4% are not collected (wrote off). It is estimated that over 80% of businesses close due to cash flow issues. Overall, the network effect is so huge that it creates turmoil among a significant number of institutions in the MSME sector.
First, it should be in the interest of MSMEs to adopt best practices for handling customer collections and to have better credit management practices. With the small and semi-organized nature of MSMEs, it is important to prioritize the time they spend on different business functions. In this new digital era, it only takes a click to find the right and effective digital platforms for businesses to collect dues from customers easily. This would immensely help MSMEs to increase time spent on sales and growth
Several government initiatives and private actors have sprung up to help MSMEs with solutions that help collect payments faster and thus correct delayed payment cycles for the industry.
- What are the different technologies that can be used by SMEs and MSMEs to boost their business?
Many small businesses still need to adapt to technology to run their business. An exception is accounting software and, more recently, fintech payments. New age technology solutions offer much more functionality with a user-friendly interface. The majority of SMEs operate on credit, which requires effective credit management software that functions as a credit-checking service in large organizations. Some organizations like ours offer end-to-end credit management technology solutions to reduce credit risk and improve collections. Another important aspect is customer relationship management for SMBs who aspire to grow beyond their limits of familiarity, there are many cost-effective CRM software available in the market.
- What are your plans for growth and expansion? Do you intend to expand your portfolio?
Our plan for the next 12 months is to meet the needs of at least 30,000 sellers and at least 100,000 buyers, strengthen their financial well-being and fuel their growth. Over the past 12 months, we’ve gone from finding SMBs for our product to finding products for SMBs. We will therefore continue to seek to build solutions that solve the problems of SMEs.
- What is the market opportunity you see in India?
Small businesses in India have remained small for decades and now is the time for these entrepreneurs to grow faster through technology and the internet. Every small entrepreneur has witnessed the power of technology in the mainstream tech revolution. They have now started thinking about using the technology in their businesses as well. With 6.4 million enterprises, the number largely dominated by micro-enterprises will experience rapid growth. We will witness the growth of many micro-enterprises to become small and medium-sized enterprises over the next 2-3 years. And the expected level of growth is entirely possible if companies start adapting to the technology.
- What data analytics technology does Recordent use to help its customers build better businesses?
Our data analysis solution is based on Microsoft’s Power BI tool. The solution offered by Recordent helps companies in the following areas:
- Customer/buyer analysis to understand behavior and trends
- Customer level and invoice level sales analysis
- Analysis of collections on outstanding payments at customer level and at invoice level
- Analysis of payments received at customer level and at invoice level
SMBs using clocking accounting software can immediately start using this functionality on Recordent with its bespoke clocking plugin. Other accounting software is also supported through custom mode support.