Mandatory TReDS onboarding for Corporates with turnover of 250cr or more

In a significant move to bolster the financial health of Micro, Small, and Medium Enterprises (MSMEs), the Ministry of MSME has recently issued a notification mandating businesses with 250cr+ turnover to onboard the Trade Receivables Discounting System (TReDS) platform. This directive, effective from November 7th, 2024, is a testament to the government’s commitment to enhancing the liquidity of MSMEs and streamlining the payment cycle.

What is TReDS?

TReDS is an electronic platform that facilitates the discounting of trade receivables. It connects MSMEs with financial institutions, enabling them to sell their unpaid invoices at a discount and receive immediate funds. This mechanism significantly reduces the payment cycle, freeing up working capital for MSMEs, and fostering their growth and development.

Why is TReDS important?

● Faster Payments: TReDS accelerates the payment cycle, ensuring that MSMEs receive timely payments for their goods and services.

● Improved Cash Flow: By receiving funds upfront, MSMEs can optimise their cash flow, invest in growth initiatives, and meet their operational expenses.

● Reduced Financial Risk: TReDS mitigates the risk of delayed payments, safeguarding MSMEs from potential financial distress.

● Enhanced Transparency: The platform offers a transparent and efficient process, providing visibility into the discounting process and ensuring fair pricing.

The new mandate: A game changer

The latest government notification mandates that all companies registered under the Companies Act, 2013, with a turnover exceeding ₹250 crore, must onboard the TReDS platform. This expansion of the TReDS mandate is a crucial step towards creating a more inclusive and efficient financial ecosystem for MSMEs

Key benefits for Corporates

Extended Payment Cycles

The payment cycle decided during the contracts is usually limited to 45 days. But with the reverse-factoring feature on TReDS, corporates can extend their payment cycle period through a financer, while ensuring that the vendor gets paid on time. This helps corporates maintain a healthy vendor relationship with the relief of the payment cycle.

Improved Working Capital

The discounting feature also helps corporates put the working capital to use based on priority. Whether the vendor opts for discounting or the corporate opts for reverse discounting, the payment time extension enables better management of working capital.

Better Negotiations

As a buyer, negotiation plays an important role in improving the business’ financial health. When vendors get the confidence of assured timely payments through a single platform with a reduced payment cycle, the vendors will automatically be quite happy to supply their goods & services for the buyer organization, and give it preference in delivery timing, and even be able to handle larger order sizes. All of this creates a better negotiation scenario for the corporates as a buyer.

M1xchange: Your trusted TReDS partner

As a leading TReDS platform, M1xchange offers a seamless and efficient bill discounting. Our dedicated team is committed to assisting corporates in navigating the TReDS ecosystem and maximising its benefits.

Time to take action

As the deadline for onboarding to TReDS approaches on March 31st, 2025, corporates with a turnover exceeding ₹250 crore must prioritise this task. Embracing TReDS is not just a regulatory requirement, but a strategic move that can benefit corporates in numerous ways. By optimising cash flow, improving supplier relationships, and enhancing corporate image, corporates can unlock significant value. M1xchange, with its proven track record and commitment to excellence, is well-positioned to help corporates navigate the TReDS landscape and achieve their financial goals.