Clear has entered the corporate financial services space Archit Gupta, CEO

1. What prompted Clear to launch new offerings in corporate financial services?

Our deep experience in building enterprise-grade fintech SaaS has given us enough voice to understand the pain points in this space and build technology solutions for SME credit and B2B payments in the ecosystem.

We conducted a survey of over 800 companies which revealed that payments to suppliers are delayed by approximately 60-120 days. And this is the situation despite the application of the MSME Act 2006, where companies are required to make payments to MSMEs within 45 days. Many of these suppliers end up seeking credit from unorganized sources at very high rates. Traditional credit offers are out of reach for many because they rely on cumbersome application processes and heavy collateral. As suppliers run out of credit, companies get sub-optimal returns on their cash or have idle working capital lines with banks that can be put to better use with a technology solution.

We realized that the lack of a common platform for a company, its suppliers and its financiers – is a great detriment to the successful management of a large-scale invoice discounting program. Clear’s presence in GST and e-Invoicing is best suited to address this bottleneck, allowing us to create a best-in-class platform that can seamlessly process invoices for credit disbursement.

2. What is invoice discounting and how does it work for businesses and MSMEs?

Invoice discounting is an alternative form of unsecured supply chain credit where suppliers are prepaid by corporate customers at a slightly reduced value adjusted as a discount. This allows suppliers to instantly have cash on their due invoices. A smart AI/ML-based platform connects to companies’ ERPs, shows suppliers all their due invoices, and enables selection of discount rates acceptable to both companies and their suppliers. Corporate clients have the flexibility to choose from a range of financing options to fund their prepayments: they can use their own excess cash, opt for a line of credit through banks, or send invoices to the various TReDs markets from the platform. .

3. How is Invoice Discounting better than traditional finance programs?

Well, there are three fronts where modern-day discount programs are doing better than traditional supply chain finance (SCF) programs:

  • Traditional banking SCF programs only work for a company’s top 10-15 providers, while with WhatsApp and other digital integration modules, modern platforms can run it for hundreds of providers. a business buyer. The TReDS marketplaces are reserved for MSME suppliers, while the comprehensive invoice discounting platform provides access to both MSME and non-MSME suppliers.
  • Manually running SCF programs with different banks can result in huge overhead costs for businesses, as accounting and reconciliation efforts are labor intensive. Invoice discounting makes it possible to run SCF programs with multiple banks on a single platform (integrated with ERPs) with limited intervention required from company teams since all accounting entries are automated and in real time.
  • Additionally, through invoice discounting, companies can deploy cash liquidity alongside bank lines of credit, providing more financing options to secure supplier credit security throughout the year.

4. What are the circumstances supporting these modern-day funding programs?

We believe modern-age invoice discounting and other supply chain finance programs will take off significantly with the proliferation of GST and e-invoicing, digitization of supply chains, particularly in the AP function, and enhancements to automation and self-service capabilities as well as integration with Enterprise Resource Scheduling (ERP) systems.

Thanks to India’s digitization efforts, we now have a conducive ecosystem for creating advanced lending platforms. For example, dynamic discounts are now common in prepayments where discounts can be selected on a sliding scale and are determined by days paid in advance.

5. What impact do you see on MSME suppliers when they use invoice discounting?

MSMEs using Invoice Discounting are able to sustainably grow their business with affordable credit anytime they need. However, there is something even more important that we discovered here while researching our 500+ users. Clear’s analysis found that deposit and payment behavior improved for these 500+ providers for GSTR-1 and GSTR-3B. GSTR-1 ranking performance improved by 15-20% on average, while GSTR-3B improved by 10-15%. For 50 of these suppliers, compliance with GSTR-1, GSTR-3B improved in the range of 50-100%. This means suppliers are filing and remitting GST faster and with a higher frequency than they were before signing up for a working capital solution. The availability of credit allows them greater flexibility to manage their repayments. This means for businesses that while extending credit to suppliers, they indirectly resolve their ITC claims, as suppliers now have enough cash to file and pay GST on time.

6. What are your recommendations for CFOs looking to transform their supply chain ecosystem with SaaS and financial services solutions?

We believe enabling cash flow-based lending solutions for vendors on an integrated platform is half the battle won for businesses. CFOs will need to address more inefficiencies on the vendor side that can impede credit disbursement. Non-compliant invoices, paper trails, and late filing of GST force businesses to extend credit to a very small number of priority suppliers. The long tail and the big belly of the sellers are forgotten. We meet this challenge with integrated GST compliance, AP automation and invoice discounting solutions to close all the gaps during the purchase invoice lifecycle.


Tags attributed to this article:

Leave a Comment