How can you choose the right TReDS Platform for your needs?

TReDS is known as Trade Receivables Exchange Discounting System. It is an electronic platform that is designed to facilitate the financing and discounting of trade receivables for micro, small, and medium enterprises (MSMEs) and other enterprises in India.

This blog post will guide you on how to choose the right TReDS platform for your needs.

Understanding TReDS

Before searching for a TReDS platform, it's essential to understand how it works and the benefits it offers.
  1. How does TReDS work?
➢  Invoice Uploading: Sellers (usually small or medium enterprises, SMEs) upload their invoices to the TReDS platform.

➢     Invoice Verification: The platform verifies the authenticity and eligibility of the invoices.

➢ Invoice Discounting: A financier purchases the invoice from these sellers at a discount, providing the sellers with immediate cash.

➢  Payment Collection: The financier collects the payment from the buyers when the invoice becomes due.
  1. What are the benefits of TReDS?
➢      Transparency and Automation
As the entire process is facilitated online, there is no need for human intervention, which helps eliminate the possibility of malpractice.

➢      Paperless and hassle-free procedure
TReDS streamlines the process for MSME suppliers by eliminating much of the paperwork involved.

➢      Quicker transactions and shorter finance turnaround times  
Compared to a standard factoring structure, TReDS offers faster bill approval and rapid payment against trade receivables.

➢      Competitive process of determining prices
Since auctions run the entire process, MSME suppliers are guaranteed to get the greatest prices for their invoices.

➢      Absence of follow-ups regarding payment
Once the invoices are authorised, MSME suppliers receive faster payment.

➢      Effective working capital
TReDS allows MSME suppliers to boost their liquidity by enabling early payment of invoices without waiting for the due date. 

➢      Availability of wide range of funding choices
TReDS has broadened the financing options due to large available pool of banks and NBFCs on platform to MSME vendors, going beyond traditional bank loans and advance payments.

Factors to consider when choosing a TReDS platform

After understanding the workings of the TReDS platform and its benefits, it is important to know about the factors to consider when choosing it.
These factors mainly consist of:
  1. Registration and Accreditation
TReDS platform is registered with the Reserve Bank of India (RBI). This is because they act as a seal of approval, guaranteeing that the platforms adhere to strict guidelines, run safely, and uphold excellent service standards.
  1. Fees and charges
Before selecting a trading platform, carefully consider all fees and charges to avoid an unexpected burden of costs. Some platforms may have hidden additional charges such as inactivity, withdrawal, or maintenance fees. Understanding these costs upfront will help you budget more effectively.
  1. Turnaround time (TAT)
It is important to consider turnaround time (TAT) when selecting this platform. This is because a shorter TAT means your transactions are processed quickly. This will allow you to take advantage of market opportunities without delay. This is especially important in volatile markets where prices can change rapidly.
  1. Security
When choosing a TReDS platform, security is one of the most crucial factors to consider. This is because there are many cyber threats that can lead to significant financial losses. So, a secure platform minimises these risks by implementing robust security protocols.
  1. Customer Support
Reliable customer support ensures that any problem you encounter is resolved quickly, minimising potential losses. This is why it is essential to consider this factor before choosing the platform. Consider these factors and find a reliable TReDS platform.

On November 24, 2015, the Reserve Bank of India (RBI) gave three companies "in principle" approval to set up the Trade Receivable Discounting System (TReDS) platform. On April 7, 2017, Mynd Solutions Pvt Ltd, one of the three companies, introduced the TReDS platform, i.e., M1xchange, in accordance with the Payment and Settlement System (PSS) Act of 2007.

This TReDS portal seeks to offer cash flow financing connected to MSMEs' supply chains at rates that are competitive by utilising various financiers and an open bid procedure.

Conclusion
In India, the invoice financing has grown significantly, with involvement from MSMEs and corporates rising gradually along with transaction values. M1xchange TReDS platform is an essential pathway for improving MSMEs' financial standing.

For micro, small, and medium-sized businesses (MSMEs), M1xchange is designed to make trade receivable financing and discounting more manageable and quicker.
 
 

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