Startup Mantra: Unlock Trapped Money Through “Cashinvoice”

0

PUNE Smaller vendors, distributors or retailers in a long-tail supply chain are often ignored or given lower priority by conventional banks and non-bank financial companies (NBFCs) because their financing needs are dispersed and low. cut. Today, most micro, small or medium enterprises looking for working capital take out business or personal loans, and thanks to higher interest rates, the cost of financial services for them is very high. Identifying these gaps in supply chain finance, Cashinvoice, a digital invoicing and supply chain finance marketplace designed to unlock cash trapped in the supply chain, was launched in 2018 by Arun Poojari and Shrinivas Kasar.

The Pune-based supply chain finance platform enables comprehensive debt and receivables management solutions that digitize the way companies pay and get paid. It offers dynamic invoice discounts to some of India’s leading companies.

At first

Poojari and Kasar have around two decades of experience in the financial services industry and both have worked together at ICICI Bank and Tata Capital since 2005. The city of Pune is where the duo met and had his first business idea to create a microfinance company, however this idea could not be realized then.

Kasar said: “Working together between 2010 and 2016, we both realized the potential of supply chain finance for smaller value chain stakeholders. As we had experience in the banking sector of small and medium enterprises (SMEs), we knew the challenges faced by conventional banks in achieving their objectives. To make a business of 5 crore, relationship managers would rather exploit large customers than small ones. Indeed, the required documentation and the evaluation policies of a client of 5,000,000 or 2 crore is almost the same. We realized that this problem could be solved digitally.

“Digital has the power to bring equality to the supply chain finance ecosystem. When talking about the bottom of the pyramid and creating value for the smallest stakeholder, this is only possible only through technology. We decided to create this opportunity for small players with a vision that any deserving entity should not worry about working capital,” he added.

Maintenance cost

Cash management is time-consuming, often manual and prone to human error. While these payables or receivables processes are critical, the time, effort, and resources expended in performing these functions are a significant loss of profit for any business. Cashinvoice addresses the growing need to effectively manage these non-essential but equally essential business activities.

Poojari says, “We can reduce the cost of financial services through digitalization. When we founded Cashinvoice, the idea was to link up with an anchor company (large companies) and then with their suppliers, distributors and retailers, which essentially means the whole chain, from supply to sale to the last step. Funding is a smaller piece of this, but before the funding part comes in, we connect all stakeholders for seamless information transfer. This creates a lot of value for a flagship company.

“Today, multinationals have the best of systems. We are trying to offer their best practices to a medium sized Indian company to make these small businesses competent enough. This will enable Indian businesses to compete globally,” Poojari said.

Cash optimization

Cashinvoice optimizes cash flow by digitizing invoices and leveraging supply chain finance to incentivize suppliers and customers. The platform is designed to offer a transparent, intuitive and intelligent supply chain finance solution to companies, their suppliers as well as distributors.

Explaining further, Kasar says, “Supply chain finance can be divided into two parts – supply and demand. On the supply side, the bigger players are covered by supplier financing programs and receive a discount on their bills. But small suppliers (up to 25 lakh) have never been covered by any scheme. On the other side, district-level distributors are well funded, but people below like multi-brand outlets, mom-and-pop stores, etc. are those struggling for working capital. We try to reach the long tail of the supply chain ecosystem, both on the supply and demand side. »

“We have more than 50 companies and their ecosystem stakeholders with us to whom we provide state-of-the-art technology automating end-to-end processes from creating purchase orders, generating invoices, authorizing payments, reconciliation and settlements.This automation allows companies to focus on core business activities to scale their business by prioritizing efforts in the right direction,” Kasar added.

Initial challenges

Cashinvoice is not revolutionary technology, says Poojari. “We have been doing this for 12 years in our corporate career. The only difference is that instead of the physical way, we wanted to digitize the whole process. The idea is to have a durable model while addressing the lower leg so that we can create value. Fortunately, India had financial frameworks in place and we had the experience, support and market connections. The biggest gap we had was getting the technology platform in place. »

“We decided to start. We struggled a lot to prepare our platform. We weren’t “tech people” and we were getting into the tech business. Most investors would also ask us who the technician among you is. So we found one that could deliver a great product. Nine months after starting this journey, we secured the first transaction. A lot of mental recalibration was also required as we again had to wear the “relationship manager” hat to get business. However, we believed in a mantra. Customers will always give us a chance for all the goodwill we have created over the past 12 years. Our concern was whether we fail in this chance and we must not disappoint their belief and faith in us,” he added.

Poojari and Kasar successfully brought in Tata Motors as their first customer. “There was an existing problem statement that wasn’t resolved due to cost and understanding factors. They asked us to fix it and we did it in about five months. People started asking us recognize. Our first client gave us visibility and helped stabilize our systems. Subsequently, during the Covid-19 outbreak and lockdowns, we also had time to recover and build our systems.”

Data analysis

Explaining how the system works, Kasar said, “We integrate with leading companies’ ERP systems to mine the data. We funnel the information down to a certain level to select the customers we want to target. We then contact them through a digital medium, usually SMS, Whatsapp, etc. They can complete the onboarding journey which is completely paperless. We do not require them to upload any documents. Once customers complete the onboarding process, we show them their eligibility and have the document signed.”

“Compare that to someone going for a business loan with a bank or NBFC, they have to submit a lot of paperwork, answer questions, etc. With us, it’s a seamless process mainly because we have already pre-screened and done the analysis, even before reaching the client, we already know that they meet our criteria,” he said.

Evaluation

Banks place a lot of importance on background such as bank statements, balance sheets, tax returns, etc., but when it comes to micro or small businesses that are still outside the formal financial system, they do not have these documents in place. . Cashinvoice places importance on the history of current transactions, which is basically in the form of a record between the buyer and the seller.

Poojari says, “The ledger gives a complete overview of how the transaction went between the two parties. For example, if a particular buyer buying from a seller has more or less paid on time, very few or no check bounces or no good sales returns, etc. It shows that there is a healthy business relationship and it can be a good customer. This is how we screen our clients.

“After screening, when we contact the customer, we do some basic checks like a credit bureau, GST returns, etc. We further enhance this data in order to arrive at a system-generated credit score. This is where we show the client their eligibility,” Poojari said.

Future plans

According to Kasar, the long-tail supply chain problem is the same all over the world. He said, “Entrepreneurs in advanced countries face the same challenges as Indian entrepreneurs. Also, most supply chain finance only happens on the supply side of the equation in Western markets. The way we do it in India is much more efficient and better. India is an advanced country in the financial landscape. Therefore, our goal is to globalize and conquer markets in the West, Europe and Southeast Asia.

Share.

Comments are closed.