If you’re an MSME and you export your products to customers abroad, chances are you’re quite aware of the frustration of waiting for payments. These delays can actually slow down your business significantly, making it more difficult to manage your finances, invest in expansion, and capitalize on new opportunities. Thankfully, there is a system named TReDS (Trade Receivables Discounting System) that is made to assist your kind of businesses in getting paid much earlier. Let’s get into the nitty-gritty of how it works and why it can prove to be a game-changer for your export business.

Learning About TReDS: Paying Your Invoices Earlier

The Trade Receivables Discounting System (TReDS) is basically an online portal that serves as a platform where small businesses, which require early payment of their invoices, meet banks and other financial institutions that can facilitate the same. It’s like an online marketplace. Being an MSME exporter, after shipping your product and getting the invoice approved by your customer, rather than waiting for the entire payment tenure (which can be 45, 90 days, and even more in some cases), you are able to upload this approved invoice on the TReDS platform.

Financial institutions that belong to the TReDS network can then view your invoice and pay you the amount due, less a tiny fee, the discount. What this does is get you your cash very quickly, which helps your cash flow a great deal. The Reserve Bank of India (RBI) brought TReDS to specifically fulfill the working capital requirements of small enterprises by facilitating them to receive quicker payments from large organizations, such as giant companies, government departments, and public sector undertakings.

The Big Advantages of TReDS for Small Export Businesses: A Closer Look

For small businesses that export, having timely and consistent access to funds is crucial. TReDS provides a host of important advantages that can have a direct bearing on your success:

• Faster Access to Working Capital, Explained: Suppose you’ve just exported a big order to a foreign customer, and the payment terms are 60 days. That’s a long time to hold out for the funds, and meanwhile, you may be in need of funds to pay your own vendors, fund operating expenses, or invest in fresh stock. TReDS addresses this issue by enabling you to receive most of the invoice value shortly after. This quick turnaround on working capital allows you to not be encumbered for payments, with the financial means to run and expand without being held back needlessly.
  
• No Need for Collateral Security Explained: As small businesses go to borrow funds from conventional banks, they end up having to offer collateral as security; this could be pieces of property, equipment, or other valuable belongings. This is a challenge to many MSMEs that may not have a substantial amount of assets to present as security. TReDS presents an alternative solution. The money you are given is mostly tied to the credit rating of the company which is paying you (your customer) and that they have already accepted your invoice. This minimizes the amount of security you need to provide, making it an easily accessible financing option.
  
• Competitive Discounting Rates, Simplified: Since TReDS puts several financial companies on a single platform, they effectively compete with each other to provide you with the most ideal discounting rate. This competition is to your advantage as an MSME exporter since it may result in cheaper fees than you would need to pay on a standard business loan or overdraft facility. You can shop around the financiers’ offers and select that which offers you the largest amount of money on your invoice.
  
• Less Time Spent Following Up on Payments, Explained: If you’ve ever had to chase an international customer for payment, you know it can take up a lot of time and effort. With TReDS, once your buyer has approved your invoice on the platform, the financial company takes over the responsibility of collecting the payment from them on the due date. You get your money in advance, and you do not have to waste your precious time and money on payment follow-ups anymore, so you can concentrate on other vital functions of your business, such as production and sales.
  
• An Entirely Online and Easy Process, Explained: The TReDS process is made completely online and easy to use. Right from the time you upload your invoice onto the platform to the time the payment is transferred to your bank account, everything is done online. This obviates the requirement for paper-based documents, trips to bank branches, and long manual interventions. The online nature of TReDS renders it an efficient and time-saving option for busy exporters who require to handle their finances swiftly and efficiently.

TReDS Also Benefits Buyers and Financial Companies:

Although TReDS is especially designed to assist MSMEs, it is also beneficial to the other parties in the ecosystem:

• Buyers: Can assure themselves that they are following laws that mandate payment to MSMEs on time, possibly keeping them away from penalties and preserving good relations with their suppliers. They may even be able to optimize their working capital better.
• Financial Institutions: Get access to a sizable number of MSMEs in need of finance, providing them with opportunities for short-term finance with comparatively lesser risk, as the invoices would be from established, larger players.

Getting Started with TReDS: What MSME Exporters Need to Do

As an MSME exporter looking to avail yourself of TReDS, here are some simple steps you may need to follow:

• Research TReDS Platforms: There are many TReDS platforms that operate under the guidance of RBI. You will wish to research these platforms regarding their features, charges, as well as their network of financiers and buyers.
• Check Eligibility: Make sure that your business complies with the requirements to be on board as an MSME seller on the platform.
• Register on a Platform: After you’ve selected a platform, you’ll have to register your business. This may include giving some general information and paperwork regarding your company.
• Get Your Buyers Onboard: For TReDS to be effective for you, your buyers must also be registered on the same platform. You may have to invite them to join if they are not already.
• Upload Your Invoices: After your buyer has accepted an invoice, you can upload it on the TReDS platform.
• Review Bids and Accept an Offer: After your invoice is live on the platform, you will begin to receive bids from various financial companies. Evaluate these bids and select the one that provides you with the most favorable rate.
• Receive Payment: Once you have accepted a bid, the financial company will make the payment into your account.

TReDS: A Wise Option for MSME Exporters in the Current World Market

In the modern fast-paced and competitive global business environment, survival and growth depend on healthy cash flow. TReDS offers a timely solution to MSME exporters to counter the issues of delayed payments and achieve faster access to the required funds. Through a safe, transparent, and efficient invoice discounting mechanism, TReDS can assist you in running your business better, making investments for the future.

As you look for means to make your financial processes more efficient as an exporter, keep in mind that having a sound and effective means of receiving international payments is also important. BRISKPE provides a new-age solution to receive payments from their international buyers promptly and conveniently.

And as you’re looking for ways to manage your finances smoothly as an exporter, remember that BRISKPE can also help by making it simple and fast to receive international payments directly into your account.