The 63 million small and medium businesses (SMBs) in India today, are often referred to as the backbone of India's economy. A well-earned moniker considering these enterprises account for almost 30% of the country's gross domestic product (GDP) and employ over 110 million people, which is second only to agriculture.
Like with most small businesses, cash flow and delayed payments is a very real headache daily. Over the past two decades, the average collection period for Indian SMBs has consistently exceeded 90 days. This capital stuck under the receivables column in accounting books has been a major cause of financial stress. The process of collections is fraught with both internal inefficiencies as well as communication issues with the debtors. While Indian SMBs have begun to formalize and digitize rapidly post demonetization and GST implementation, most of these businesses are still using archaic, offline processes to manage their receivables and payables. OnlyÂ 20% of India's SMBs are GST registered and fewer than 5 million (i.e. 1 in 13 businesses) use standard accounting software such as Tally.
Today, as a new generation of digital-native business owners take over traditionally run family SMBs, there is strong demand for technology tools that provide greater visibility and control over cash flow and finances. The pandemic has accelerated the need for digitization as working capital cycles have elongated even further and liquidity remains tight for SMBs.
Being part of a small business family and co-founding a B2B procurement platform, Kunal Aggarwal, CredFlow's founder, had first-hand experience of the challenges that Indian SMBs face daily. This served as his inspiration to build CredFlow, a cash flow management SaaS platform that helps SMBs manage their finances and improve collection cycles. It does this by providing a dashboard of pending amounts by customers, sending timely payment reminders to said customers, validating invoices and negotiating discounts for early payment, thus enabling these businesses to speed up their collection cycles by nearly a third!
The platform syncs with the customer's accounting software and provides real-time insights related to cash flows, payments and collections that can be accessed by the business owner anytime anywhere, without relying on accountants or advisors. This empowers SMB business owners with a greater degree of access, control and convenience. It also helps them build accountability, transparency and efficiency in managing and forecasting cashflows and making smarter business decisions, aiding faster growth. Since its launch in May 2020, over 5000 businesses have used Credflow to process and sync invoices worth more than Rs. 70,000 crore (~$10billion).
One such business owner, Ravikiran Aware, owns a paint manufacturing business in Nashik with an annual turnover of INR 2 - 3 Cr. He has 100+ dealers with a credit period of 45-60 days.
“In reality, dealers seldom pay us before 75 days”, he says, “that too after repeated phone reminders. Thanks to CredFlow’s automated payment reminders, collections have become faster and smoother.” The fact that he does not need to enter any data manually into the platform and the improvement in the collection process and period mean he’s eagerly recommending the platform to other business owners in his network. Clearly, CredFlow’s simple yet powerful tool had touched his life meaningfully. And there are lots of examples like Ravikiran Aware in many small towns and cities across India – Siliguri, Guwahati, Idukki, Nashik, Raipur, Baheri and Alwar to name a few.
Much of fintech innovation in the past decade has focused either on large enterprises or retailers and micro-enterprises, while the mid-market B2B segment that CredFlow targets remains largely underserved. Kunal and his team are passionate about solving for the critical needs of SMB business owners, who are the largest employers of the Next Half Billion.
Given the depth of its usage among SMB business owners, we are confident about CredFlow’s potential to evolve into an embedded finance platform offering a variety of relevant financial products ranging from cashflow based financing to treasury management and payments management, all of which could help improve the financial health of SMBs.
We are proud to back this bold entrepreneur to build more innovative solutions that could help these SMBs, the drivers of India’s growth and employment, find a new gear.
Omidyar Network India invests in bold entrepreneurs who help create a meaningful life for every Indian, especially the hundreds of millions of Indians in low-income and lower-middle-income populations, ranging from the poorest among us to the existing middle class. To drive empowerment and social impact at scale, we work with entrepreneurs in the private, nonprofit and public sectors, who are tackling India’s hardest and most chronic problems. We invest in the areas of Digital Society, Education, Emerging Tech, Financial Inclusion, Cities & Innovation and Property Inclusivity. Omidyar Network India is part of the Omidyar Group, a diverse collection of companies, organizations and initiatives, supported by philanthropists Pam and Pierre Omidyar, founder of eBay.