Trade Receivables Discounting System (TReDS) is an RBI-regulated electronic platform that revolutionises invoice discounting for Indian Micro, Small & Medium Enterprises (MSMEs). The RBI launched the TReDS platform in 2018 to enable MSMEs to convert unpaid invoices into instant cash flow through competitive bidding by multiple financiers, thereby eliminating lengthy payment cycles and working capital constraints. TReDS transactions are "without recourse," meaning MSMEs bear no liability if buyers default.The latest government mandate requires all companies with a turnover of more than Rs 250 crore to register on TReDS platforms by 30th June 2025. This move significantly expands MSME access to timely payments.Key TakeawaysBudget 2026Central Public Sector Enterprises (CPSEs) shall route all MSME purchase transactions through the TReDS platform.The government will extend credit guarantee support for invoice discounting conducted via TReDS.Procurement data from the GeM portal will be integrated with TReDS platforms.TReDS receivables will be permitted to be securitised as asset-backed securities. The Trade Receivables Discounting System (TReDS) is an invoice discounting platform established by the Reserve Bank of India (RBI) to regulate trade receivables between MSMEs, large organisations, and financiers.TReDS represents a paradigm shift in MSME financing, offering risk-free, transparent, and competitive access to working capital.With the 2025 mandate expanding businesses with more than Rs 250 crores, TReDS is positioned to become the primary mechanism for MSME invoice discounting in India.What is TReDS?The full form of TReDS is Trade Receivables Discounting System. MSMEs still struggle with unpaid invoices from suppliers.

Dynamic discounting usually applies to individual invoices where the discount is expressed as a percentage of the face value of that particular invoice. Our Dynamic discounting guide will give you complete details about the concept and its usefulness for you to evaluate it for your business.What is Dynamic Discounting?Businesses can reduce their costs by taking advantage of dynamic discounting, which involves vendors offering a variable early payment discount to their buyers. The earlier the buyer pays, the higher the discount. The suppliers offer the buyers a choice of invoice payment dates and the calculated discount amount for those dates.Parties in Dynamic Discounting and EligibilityDynamic discounting essentially contains two main parties, the vendor (supplier) and the buyer (enterprise). Buyers with sufficient cash usually opt for dynamic discounting to improve the financial health of their supply chain.

The inventory holding period is a key performance indicator for managers to assess liquidity. It measures the ability of a business to manage its assets and how long it takes to convert them into cash or income.Meaning and formula for inventory holding periodInventory Holding Period is a ratio that depicts the number of days for which an organisation holds inventory before sales. It shows how many days it takes for inventory to rotate in the business. An average stock = (Opening stock + Closing stock) / 2.Inventory holding period, also known as days in inventory, can be calculated by dividing the average inventory by the cost of goods sold per day, depicted by the following formulas:Inventory Holding Period (in no. of days)= (Average Inventory / Cost of goods sold)×365ORInventory Holding Period (in no.

Most of the business-to-business sales happen on credit. Delivering goods and services on the promise of payment at a future date may sometimes require legal assurances. Bill of exchange serves this purpose. This written contract is essential for the viability of modern cross-border trading of goods and services. This article discusses the meaning of bill of exchange , its different types and formats with examples. What is the bill of exchange?A bill of exchange is a written instruction to pay a pre-specified sum of money at a pre-specified date or on demand. It involves a drawer and a drawee.

Many times, people consider working capital separately from accounts payables and try to manage them independently. However, in reality, they are interconnected, and every company should strive to leverage credit terms under payables to finance their working capital. Actual growth depends on how efficiently we leverage the working capital hidden in accounts payables. This article discussed how you can optimise payables to improve cash flow and liquidity of working capital.Why are payables key to cash flow management?Accounts payables (or payables in short) are liabilities for companies. It refers to the amount a company owes to its suppliers for goods and services purchased. Paying off such dues without delays improves a company’s relationships with its suppliers and vendors, opens up access to better pricing, assures timely supplies in future, and reduces operational stresses.

The sample acknowledgement letters for receipt of payment provided below can be used as format templates for official and personal purposes. You can further align these letters to your requirements by making a few necessary changes.Acknowledgement Letters for Receipt of PaymentDear Sir,This letter acknowledges the receipt of your payment for the products supplied. We have received the complete payment for order number 345, which was supplied last week. Thank you for your continued trust in our company.We look forward to working with you in the future.Yours sincerely,Nikita SinghManager AccountsDear Manager,On behalf of our company Infinity Pvt. Ltd., I would like to acknowledge that we have received a payment of Rs.

Stretching out your Days Payable Outstanding (DPO) could be wonderful for your cash flow, but do it without regard, and you risk ruining the relationship with the vendors who keep your business afloat. So how do you strike the balance?Let's take a walk through how DPO works, the risk of taking it too far, and a viable solution that maintains both your books and your vendor relationships in good working condition.What is DPO and Why Does It Matter?Days Payable Outstanding (DPO) refers to the number of days, on average, your company take to pay its suppliers. The greater the DPO, the more room there is for your cash flow - provided that your vendors agree.Why would companies attempt to stretch DPO?The following are some typical reasons:Enhance cash flow: Pushing out payments serves to keep money in the hands of companies longer, which is particularly helpful when revenues are low.Pay short-term obligations on time: Time to pay suppliers can assist in paying salaries, EMIs, and other short-term obligations.Improve working capital effectiveness: DPO optimisation can drive an improved working capital position and a 5% improvement in cash flow cycles.Better negotiate with financiers: Longer DPO provides better bargaining strength in negotiating credit terms or working capital lines.Match outflows with inflows of cash: Companies synchronise customer collections with supplier payments to level out cash management.A longer DPO may be good — but only if done strategically and openly, so it doesn't put undue pressure on supplier trust.The Risk of Extending DPOStretching your terms of payment too far might look good on paper — until your supplier starts sending reminder notices or holds up delivery. Here's where things can go wrong:Strained relations – Your supplier will feel undervalued.Tighter credit terms – They can cut your credit period or ask for advance payments.Delivery delays – You can clog up your entire supply chain.The Win-Win Solution: Invoice DiscountingIf you want to extend DPO without making your vendors feel displeased, consider invoice discounting a money alternative in which your vendors get paid early and you keep paying late. Here's how it works-Step 1: Vendor issues InvoiceStep 2: Vendor requires early paymentStep 3: Vendor uses Invoice DiscountingStep 4: Financier pays Vendor early (e.g., Day 5)Step 5: Buyer (you) pays Financier later (e.g., Day 60)Sellers get paid in cash, so they don't have to worry about getting paid on time.

Bill discounting is a popular financing technique in India, which you can choose for short-term finance. Bill discounting is simple- Sell unpaid invoices or bills to a bank or financial institution at a discounted price rather than waiting for your customer to pay on the due date. It enables a seamless way to manage cash flows, converting unpaid invoices into working capital for your enterprise. Dive into this article for details about how bill discounting works, the umpteen benefits it unlocks for your enterprise, along with the potential risks associated. By the end of this article, you will understand the following-Meaning of bill discounting and its importanceHow bill discounting worksExamples of bill discountingBenefits of bill discounting for your enterpriseRisks associated with bill discountingWhat is Bill Discounting?Simply explained, bill discounting is a financing method to get early payment for your credit-based sales invoices. It could also be referred to as invoice discounting, involving a bank or financial institution as the finance provider.  Bill Discounting ExampleTo give you a bill discounting example, imagine yourself as a seller who has made credit sales worth Rs.10,00,000 to a certain customer or buyer.

The procure-to-pay process is an end-to-end workflow for buying goods and services, starting from discovering the need for it to settling dues with the vendor. The P2P process is called so because of the ordered sequence of different activities, from the first steps of procuring goods to the final step of paying for them. Read along as we discuss the procure-to-pay process, including the different stages, importance, and best practices.Key takeaways-Procure to pay process is also popularly known as P2P process. Procure to pay process starts from procurement and ends with invoice payment.P2P process helps in cost management by avoiding duplicate orders and payments errors.What is Procure-to-Pay?Procure-to-pay process is the business process of requisitioning, purchasing, receiving, and paying for products and services. P2P process is a set of integrated activities that helps a company obtain the required goods or services from a supplier. It helps companies streamline procurement, control costs, and improve vendor management.By automating this process, i.e., integrating it with accounts payable, vendor payment systems, and invoice management, you can ensure compliance, accuracy, and efficiency. Why is The Procure-to-Pay Process Important?A P2P process helps organisations manage their spending and reduce costs. It can also help you save costs by reducing manual and laborious tasks. Besides these, here are some reasons why a P2P process is important:Streamlines the procurement process by clearly defining all the necessary actions.Allows buyers and suppliers to keep track of invoices and the payment progress. Strengthens relationships with suppliers by ensuring timely payment and resolving issues promptly.Prevents mistakes such as duplicate orders, overpaying, and payment errors.Procure-to-Pay (P2P) ProcessProcure-to-pay includes all the stages between buying goods or services from a supplier and paying for them. Here are the six different stages of a P2P process:Step 1: Identify needs: The first phase in the procure-to-pay process is determining and defining the business requirements with the assistance of cross-functional stakeholders.

Purchase orders play a fundamental role in a company's financial record-keeping. A purchase order serves as a means to track expenses and manage budgets and is a vital tool for maintaining effective supplier relationships. In this article, we will demystify the concept of a purchase order, delve into its various types, examine its standard format, and highlight its valuable advantages to businesses.Key TakeawaysA purchase order (PO) is an official document issued to suppliers by the accounts payable or procurement department when purchasing goods or servicesIt becomes a legal contract when the vendor agrees.PO is not the same as Purchase Requisition. A purchase requisition is an internal document generated by employees to request purchases. It serves as an in-house notification, signalling the need for materials within the organisation. What is a Purchase Order?A purchase order (PO) becomes a legal contract when the vendor agrees. It's like a written request to buy things or services from a vendor.