THE ESSENCE OF ONLINE OVER THE TRADITIONAL BASED APPROACH FOR BILLS PAYABLE & RECEIVABLES

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

- Sundeep Mohindru

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.

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.