The LED lighting industry is a dynamic and fast evolving business with swift advancement in technology. It has also witnessed constantly changing economic and financial trends, and has a complex supply chain for manufacturing LED lighting products, which is cumbersome to manage. With increased competition and the resultant pressure on margins, focus on cost control has become paramount.
Most of the large projects are undertaken with cost guarantees to the end customers such as IT/ITES industries, hotels, public institutions and municipalities. The capital cost involved in the installation is to be recovered by the reduction in electricity cost over a predetermined period of time.
In the LED lighting industry, management of the supply chain plays a crucial role. Effective management of supply chain increases efficiency of the production process, which, in turn, will reduce lead time. It is a known fact that the shorter the lead time, it will be less difficult to manage the inventory.
Come On-Board TReDS
SYSKA LED overcame the above supply chain management and cash issues by liaising with M1xchange. They got their invoices financed and are enjoying the smooth flow of capital in their business.
The response from the vendor was overwhelming. They said, to receive prepayment from TReDs was incredibly smooth and delightful and they almost couldn’t believe that with such minimal paperwork and interaction with the exchange and buyer such prepayment could be secured.
In the conventional form it would have taken several weeks of discussions and lot of paper work to secure such prepayment.
Prepayments to vendors at competitive rates also helps large corporates to secure vendor loyalty and lower cost of procurement. It can even be an effective way to manage working capital. M1xchange enables these benefits to corporates and vendors.
M1xchange is a part of TReDS initiative by RBI to secure finances from Small & Medium Enterprises. It is a platform for MSME’s to come & raise the bills (invoices) to corporate buyers, government departments & PSUs.
Mynd Solution has provided a platform for industries to come & post the Trade Receivables and get them financed by any financial institutions at competitive rates.
How does it Work?
The bill discounting process starts when the industry Supplier raise the invoice and the Buyer validates the same. This permits the financiers which are the Banks or the factoring companies to bid against the verified invoice. Once the supplier accepts the bid, the payment is processed in T+2 days. The process gives flexibility to the Suppliers to choose the best financier on financing cost.
Advantages of TReDS
With the aid of Invoice Discounting Companies, LED Lighting Companies can convert their invoices into discounting units and receive the payments against them from the financiers. There are many other benefits of invoice discounting and exchange services.
- Minimise cost.
- It does not add borrowings or any additional liability on their balance sheet.
- It does not use the cash flows of the buyer for the prepayment.
- Much faster turnaround than conventional supply chain facilities by banks.
- Minimal Paperwork.
- Security of digital platform.
- Minimize duplicate payments and other operational risks.
- Can be integrated with ERP systems and avoid manual processes.
TReDs benefit the companies by increasing the transparency and the level of automation of business processes. The purpose is to save processing costs and reduce the working capital of the company.
To be competitive, CFOs are looking to better manage the finances in the supply chain, integrate and standardize processes, achieve a return on technology investments, and manage risk while improving margins and reducing costs. In sum, improving performance with innovation and technology with TReDS enhances finance operational efficiency, strengthens finance reporting and analysis, and improves finance control and predictability.
- The main objective of every company is to minimise working capital tied up in the supply chain, and TReDS will help these industries achieve this motive.
- CFOs often analyse and compare working capital performance with the same type of industry and of roughly same size, to determine the glitches in the supply chain process.
- In M1xchange banks act as a sort of financial outsourcer who is better equipped to keep the supply chain running more effectively.
- M1xchange also helps companies to mitigate risk and maintain stability in company’s cash flow planning.
- The ‘just-in-time operations’ way of working has effectively replaced inventories with cash because companies need to have cash available to be able to specific issues, and M1xchange solves this problem without any hassles with the help of technology.
Traditional bank lending is full of hassles and includes lot of paperwork. With usual sources of liquidity and finance not being at the disposal, obtaining and finding cash is more difficult than ever. M1xchange takes a universal approach to the physical and financial flows involved in the supply chain. It can lead to a range of benefits for buyers, suppliers and banks by uncovering the opportunities surrounded in their relationship.
Mynd has more than 15 years of expertise in managing payable processes of various large companies. Our client list includes more than 270 corporates including several multinationals.
This experience had enabled us to develop several processes and technologies which are put into use in M1xchange as well.
M1xchange is agile and responsive to customer requirements. We work on solution approach to the client’s supply chain requirements to enhance the efficiencies, rather than selling a template product offering.
An inference can be drawn here is that invoice discounting is fast, flexible and hassle free with full maintenance of confidentiality. Working with an invoice discounting company will enable the flow of cash in business and will save it from approaching the financial institutes to borrow the capital in order to run the business.
If you are an LED lighting industry or deal with the export of electric cables and are struggling with the insufficient working capital for your business, you can reach out to us to know how we can help you achieve your business goals.