CFOSME

  When a company wins government contracts, it is often a sign that it is entering a phase of rapid growth, as it can mean more contracts, more employees, and more potential revenue. However, it also means that it is likely to face a financial challenge that many GovCon companies eventually face: cash flow pressures. Unlike other contracts in the private sector, government contracts often involve longer payment terms, which can involve several levels of approvals before a company can actually get paid. This can mean that companies often have to front their operational expenses, such as: Project mobilization and site setup Labour and subcontractor payments Materials and equipment procurement Of course, as contracts become more scalable, more capital can become tied up in accounts receivable, which can drive up Days Sales Outstanding (DSO). For GovCon companies, this can become a major challenge as it grows. In fact, it can become a make-or-break factor as to whether a company can su...

  If you are dealing with PSUs, you would already be aware of this drill. So, the order is placed, the goods are delivered, and the invoice is sent, but the payment takes weeks or even months to come through. In between, salaries have to be paid, raw materials have to be bought, etc. Now, how do you bridge this gap? Should you go with conventional factoring, reverse factoring with the buyer’s credit, or  India’s Trade Receivables Discounting System (TReDS) facility , which is specifically created for MSMEs? But, most importantly, which one is best suited if your buyer is a PSU with its own approval and payment cycles? To help you understand these differences, let’s discuss how each of these models works, so you can benefit from them. What Is TReDS and How It Helps MSME and PSU Suppliers Trade Receivables Discounting System, or TReDS, is a RBI-regulated digital platform that enables  MSMEs to convert  their unpaid invoices into immediate cash. Rather than waiting week...

  Most businesses have long payment cycles. For instance, the suppliers may deliver the goods today but may take as long as 30, 60, or even 90 days to make the payment. Although this is helpful for the buyer in terms of  cash flow management , it may also create difficulties for the suppliers since they may also have cash flow requirements for the smooth running of the business. Supply chain finance  is the solution for this problem. It allows the suppliers to make the payment for the invoices they have sent while the buyer continues with the normal payment cycle. In this article, we will tell you what supply chain finance is, how it works, the types of supply chain finance used in India, the benefits of supply chain finance, and when businesses should use supply chain finance. What Is Supply Chain Financing? Supply chain finance is a financial solution that allows the suppliers to make the payment for the invoices they have sent while the buyer continues with the normal ...