Credit Management & Cash Flow Problems By Winny Patro – Recordent

In this article, Winny Patro shares how Recordent solves SMEs’ credit management and cash flow problems.

We’ll cover:

1. Q: What is Recordent? 
2. Q: How does Recordent solve the Credit management problem? What would be an example of it in the case of a wholesaler or retailer? 
3. Q: Could you talk a little bit about why those kinds of timely communications and reminders are important?
4. Q: How does the Recordent help business or clients improve their collection process?
5. Q: How many SMEs overall do you think would be your target market? 
6. Q: What are the specific types of businesses that you feel will most benefit from using Recordent?
7. Q: When did you realize that you wanted to create Recordent? Where were you, and what was that experience? 
8. Q: Could you share what is cRediDue and cRediEye? 
9. Q: Is Recordent all integrated with the credit bureaus over there?
10. Q: How many people or how many businesses have already joined Recordent?
11. Q: Where do you see Recordent in the next two to three years?

Q: What is Recordent?

Recordent is a sort of fintech platform helping small and medium businesses in India. It’s providing them with credit management solutions. The core focus of the requirement is to solve the delay payments problem that most of these SMEs face. 

Especially those SMEs who do transactions based on credit face a lot of challenges in the country. Today in terms of receiving payments late and then further leading to cash flow issues. That’s a problem we are solving. 

We have a completely tech-based solution for SMEs to use our platform for complete credit management and part of the credit management; the major feature is about improving collections. 

Q: How does Recordent solve the Credit management problem? What would be an example of it in the case of a wholesaler or retailer?

I think the best example to talk about here is, let’s say, a manufacturing company or a distributor. So when the value chain goes from a manufacturer to the last main retailer who sells it to the individual customer, there is a whole lot of the value chain, which is almost like a waterfall. 

The manufacturer gives it to the distributor, and the distributor sells it to the wholesaler, then the wholesaler sends it to the last mile retailer. The whole process, the value chain, everything happens on credit so let me take an example of the manufacturing company. 

So the manufacturing company typically pushes their product to the distributor on credit. Generally, the credit period in India keeps differs based on the sector and the kind of geography that you operate, but, on average is around 45 to 60 days. 

So you prepare and plan your cash flows, keeping that business credit period in mind for 45 days, and post that, you will start facing the pinch of cash flows. Because if you don’t get the payments, if the manufacturing company is not getting the payments from the distributor after 45 days, then they start running into cash flows. 

So what happens when they start using a technology platform like ours, they are recording all the information or at the time of providing the credit. At the same time, raising the invoice and that’s being tracked. 

So when it gets tracked by the buyer, or in this case, the distributor knows how the payment track record has been with the seller and how many invoices are paid and unpaid, there is transparency. The first thing that is being built. 

Second is the track record which generally is so important in this age of digitalization.  

When you want to get a loan or when somebody wants to check your payment history, we sensitize the buyer about how the platform tracks their payment over some time, and that can be utilized by the buyer itself to get a better loan or a better credit and so on. 

So third and most importantly, we educate them on why they need to pay on time. Therefore, in this flow of the platform, the manufacturer is getting benefited by getting payments on time. 

So that’s sort of a use case of how a manufacturing company uses a platform for collecting deduce. 

Now besides this, there is also a feature for the manufacturing company. If the manufacturing company wants to onboard a new distributor or a new buyer, the manufacturing company can buy a credit report from us and can check the payment history of the prospect of buyer and distributor before making a decision which empowers a manufacturing company. 

Q: Could you talk a little bit about why those kinds of timely communications and reminders are important?

Well, I think from two perspectives it is very, very important. One is from the perspective of reminding the buyers; the second is it is also from the perspective of letting the buyer know how their payment track record is getting affected. 

The first case, which is about nothing but sending a reminder, is being done by many platforms. I think it’s pretty much available there, and everybody is doing it, and most of the sellers do it. 

The second case is how you do this is important. If I send out a text message saying that you’re five days overdue with a link to the buyer to click and see what the track record is looking like and how it has taken off over overdue.  

Now that has an impact that triggers the behavior to pay faster rather; it motivates the buyer to pay faster. 

So the important aspect here is to not just remind the buyer but also trigger the behavior to pay on time and make them understand if you are not paying on time, there is a consequence that the other buyer may have to face in the future because your tractor tactic is getting effective.

So right from the one-day overdue to as they keep delaying it for more than 10-15 days or 30 days, you need to communicate this. As you keep communicating, there’s a high chance of buyers getting motivated and coming back and paying on time.

Q: How does the Recordent help business or clients improve their collection process?

There are a lot of case studies and in this particular case is nothing different from what we do for other businesses but let me take you through that case study. 

So this was a business that heard about us through our webinar, and then immediately they wanted to look at the platform, and especially they were having issues with this particular buyer, and the buyer has not been able to pay for the last seven months. 

Then they thought they should start using our platform with that buyer to start with, so they uploaded videos, which is to the tune of 15 lakh Indian rupees. So that sort of boils down to two 20k US dollars is the payment that has been pending for the last seven months. 

The seller had come on the platform uploaded, and today morning, they have uploaded around, let’s say 10:30 in the morning, and then the first notification that had gone from the platform is like after six or seven hours. 

So the same day, the buyer received a message saying that the seller had uploaded your pending invoices on the platform, and the invoice had been pending for more than 180 plus days; please check your report and the track record; this is the link that we have sent.

Now, the buyer had immediately clicked on the link and came back onto the platform and saw that the seller uploaded almost ten plus invoices which were earlier the world ones and the new ones and the pending ones and everything. 

Then the next day, another communication had gone from the platform within like 24 hours. Another communication went out in email again with the link sensitizing the importance of how the track record is getting affected, and then immediately, the buyer started interacting with the seller directly over the call. 

The next day within 48 hours, literally from the first time that they received a text, he cleared the dues. So that was something very interesting. In this case, I think the understanding rather than the outcome or when we analyze what we understood is that the buyer has not given the priority for this moment. 

The moment there is something a third-party platform like Recordent just comes into the picture and then starts providing this report and how the track record is getting affected, we see the buyer understanding the consequence of this and immediately converting this into a priority for him to pay. 

So that is one of the key challenges with many businesses in the country today. They don’t take B2B payments seriously. I mean, when I say seriously, in a sense, they don’t give priority to it because they don’t see any consequence of paying late. Whereas if you see these businesses pay their bank loans and credit cards on time because they know there is a consequence. 

Q: How many SMEs overall do you think would be your target market?

From the Indian context, the way today we see the market is largely dominated in terms of volumes, not in terms of value. But in terms of volumes of businesses, a lot of businesses are in the MSME space. 

What we call MSME is a Micro, Small, and Medium Enterprise. There are 6.3 crore businesses, so that’s like 63 million, a number of the 16 million businesses in India, which are micro, small, and medium enterprises. 

They all account for almost 180 million workforces, which sort of almost makes it to 48% of the workforce in the country. So that’s the importance in terms of the workforce or job creation as far as the Indian economy is concerned. 

So imagine why millions of people in the workforce are working in this MSME sector? In this sector, leaving the micros, which are largely the last main retailers, and everybody else operates their businesses on credit. 

So to the extent of 30 million businesses, sort of 63 million, 13 million businesses operate their business on credit. These are primarily manufacturing companies, large stockist distributors, and wholesalers.

Q: What are the specific types of businesses that you feel will most benefit from using Recordent?

Well, in that 63 million businesses, as I mentioned, 30 million operate on credit. In those, the key focus for us and the target market is those who are on the top of the waterfall. The manufacturing distributors were on top of it whether the product gets distributed over a channel, but I think our key focus is the manufacturing. 

We are sector agnostic, but if we have to deep dive into sectors, there are three key sectors that we observe have huge potential in terms of adapting to Recordent and very faster. That is one in the hospitality sector, hospitality, and FNB together. 

There’s a cube sector where we are seeing a phenomenal attraction, followed by electrical and automobile cameras and manufacturing companies. These two are key sectors that are adopting Recordent very fast. 

Q: When did you realize that you wanted to create Recordent? Where were you, and what was that experience?

I think it didn’t happen overnight. We spent almost close to three months deep-diving into the market, and now we want to solve the problem as it is sort of solved in other countries. So I was about to take up a large assignment with the government of India to head the startups and innovation policy for the country. 

For me, it was a choice of whether to serve the nation by running the startup council or to take up the opportunity to build a large problem like what requirement is trying to solve. 

So between that, it was so more of a decision of figuring out, okay, I’m in the mid-30s, there is still more entrepreneurship left in me. 

So I have decided it’s like how am I mid-30 sportsmen keep thinking there is still more sport left in you. So that’s what sort of prompted me to take the route of building Recordent and creating Recordent. 

At the end of the day, in both roles, whether I was taking up government or this, both have a lot of social impacts because if we can solve this problem for SMEs through recurrent, most businesses would be able to grow better and create a lot of jobs for the country. 

Ultimately, that’s a great social impact, so last October 2019, around the last week of September 2019, was the moment I’ve decided, okay, that’s it, let’s go and create this.

Q: Could you share what is cRediDue and cRediEye?

It is two flagship products that we have. cRediDue is the one that manages the complete customer reviews and buyers used on the platform, which is nothing but your end-to-end uploading from invoices to dealing with your payments and everything. 

So it provides a dashboard between a buyer and seller to also do a re-invoice reconciliation. So that’s ResiDue, pretty much the invoice management and the invoice recalculation and payment modules and raising disputes, dispute resolution, and payment between a buyer and seller, so that’s what cRediDue is all about. 

Then cRediEye is nothing but the information that we provide to sellers, and they are making decisions to provide credit to the buyers. So cRediEye is more like either information, so credit information is what we talk about in credit you.

Q: Is Recordent all integrated with the credit bureaus over there?

Yeah, we work with Equifax, one of the four credit bureaus in the country. So Equifax provides us the data through a structured and very secure platform and APIs.

Q: How many people or how many businesses have already joined Recordent?

The total number of businesses who signed up on the platform and sellers is about six thousand, and on the buyer’s side, about more than 10,000 of them but out of 6000 in terms of adoption, we still have to achieve good numbers. 

We still see a good number; 6 people are signing up but not still not completely using the platform, so to give you the numbers, there are six thousand plus businesses who have signed up for the platform. 

Q: Where do you see Recordent in the next two to three years?

In the next two to three years mostly, we are going to focus on solving this problem for SMEs through associations and industry bodies which are proving to be very, very interesting. 

The value proposition, most of the industry parties gather all the members together to use the platform, and few industry bodies are mandating all the members in the body to sub-use the platform. 

Therefore they can build a collective intelligence of the information that they can and, in turn, can use it to make better decisions.

So in the next two to three years, we are looking at creating at least ten plus such collective intelligence networks with industry bodies alongside courses reaching at least a lakh (one hundred thousand) businesses using the platform. 

Q: You have just raised seed capital, or you are still in the process of raising the “A-Round”? 

Yeah, we are in the process of going for a CDCA. You are right.