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C2FO Powers Early Payment Programs for the World’s Largest Companies.
Discover expert insights on working capital, cash flow optimisation, supply chain management and more.
We believe all businesses can and should have equitable access to low-cost, convenient capital to grow and thrive.
The surge in commodity prices and logistics costs, delayed shipments and skyrocketing fuel prices are some of the primary challenges faced by MSMEs in India today. Explore how dynamic discounting is helping them bridge working capital needs.
The relationship between MSMEs and large enterprises in a supply chain is peculiar. Supported by economic interdependence, these relationships are further strengthened by their primary objective — building and sustaining a successful supply chain. For MSMEs, creating a dependable supply chain is crucial to meet their short-term working capital needs. For enterprises, it helps in ensuring the timely and steady delivery of goods.
In India, however, the situation is a little different. This relationship tends to get affected by factors such as delayed payments, an increasingly conservative lending sector, inadequate traditional vendor financing program, changes in working capital requirements and inefficiencies in the supply chain. On top of this, rising commodity prices and logistics costs, delayed shipments and skyrocketing fuel prices are some of the other hardships businesses face. This leads to adverse results for the entire supply chain network, especially in today’s increasingly unpredictable economic environment. Indian MSMEs, accounting for the bulk of Indian suppliers, are the hardest hit when they face working capital shortages from the supply chain or other financial systems, especially during economic uncertainties. All these challenges lead MSMEs to a major need: an improved supply chain with the right cash flow.
The government of India (GoI), in May 2020, announced schemes under the INR 20 lakh crore “Aatmanirbhar Bharat” stimulus package. These included three primary schemes — the INR 3 lakh crore emergency credit line guarantee scheme (ECLGS) collateral-free loan scheme; the INR 20,000 crore subordinated debt for MSMEs; and the INR 50,000 crore equity infusions through the funds of funds (FoF).
However, a recent survey by the Consortium of Indian Associations (CIA) found that 88% of 81,000 MSMEs surveyed have not availed any of these packages because of their ineligibility in fulfilling the strict qualifying criteria. Traditional working capital solutions such as loans and advances often require elaborate paperwork, involve lengthy processes and rely primarily on the creditworthiness of the MSMEs. As a result, these become virtually unhelpful for them.
The prime challenge is that MSMEs are burdened with a mountain of receivables. They are the backbone of the supply chain of large enterprises, and as manufacturing and sales take a dip, new purchases, as well as existing dues, get delayed or halted entirely.
MSMEs today need to establish a robust virtual presence fuelled by technology, digital marketing and custom software solutions. Present times demand sophisticated fintech solutions that facilitate dynamic discounting, motivating both enterprises and MSMEs to optimise working capital.
Dynamic discounting is an innovative financial technology solution wherein MSMEs receive faster payment in return for a product discount. This accelerated payment is carried out against approved bills, for a cash discount, or through a financier, which in turn collects the full amount.
With a dynamic discounting platform, enterprises can set up flexible programs that can meet the requirements of the specific section of their supplier base. Suppliers can access early payment when they need it and even pick their discount rates. Enterprises that form the early adoption base for such platforms have seen rapid adoption across their supply chain network, boosting supply chain resilience.
Dynamic discounting is a win-win solution for both MSMEs and enterprises. This solution strengthens financial health, builds trust and improves relationships throughout the supply chain.
Some of the core benefits that MSMEs can avail through dynamic discounting include:
Further, in comparison to traditional supply chain financing (SCF) solutions, dynamic discounting benefits suppliers of all sizes (big and small). Traditional SCF is beneficial only for large suppliers because they provide a large enough revenue opportunity required to justify the costly onboarding process.
C2FO’s dynamic discounting model allows enterprises to improve returns on excess cash and reduce the cost of goods sold (COGS) by providing a unique digital platform through which suppliers can offer a discount in exchange for early payment.
Here’s how the process works: A business has excess short-term cash available or has access to affordable financing. The process is initiated when the enterprise submits the approved invoices to the dynamic discounting platform. Leveraging C2FO’s patented “Price Discovery” model, suppliers submit their offers for early payment. Once the accepted offers are communicated to the enterprise, early payments are processed in exchange for a discount offer.
C2FO’s Price Discovery model offers greater flexibility and control to the suppliers, accelerating payments. In comparison to a static discounting approach, which limits the window in which suppliers can request a discount, C2FO’s dynamic discounting approach allows suppliers to request early payment at any point once an invoice is approved.
C2FO is a market leader in innovative working capital solutions that help businesses achieve their desired growth, resilience and sustainability. C2FO’s intuitive solutions take into account the intricacies of business operations and help businesses discover how those operations can evolve to deliver more value. Globally, businesses that received funding through C2FO saved an estimated INR 9000 crores in overall financing costs over what they would have paid going through traditional sources of financing. Invoices paid an average of 32 days early via the C2FO platform provided rapid access to working capital, which has proven to be essential amid rising costs, broader economic uncertainty and restricted lending from financial institutions. That is why 96 of the Fortune 100 companies are part of the C2FO network of over 1 million customers.
The Indian business scenario is undergoing a rapid transformation, which is not without unforeseen challenges. Dynamic discounting shows how businesses can thrive in a strained or unpredictable environment with intelligent technology adoption. It can also be customised, allowing enterprises to analyse how streamlined their interface is, how secure it keeps the accessible data, how it manages relationships in the supply chain, and most importantly, the consistency in delivering profitability, efficiency and compliance.
To learn more, please get in touch with a C2FO supplier relationship manager at +91 7035 7035 93 or drop an email at [email protected].
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