Cash Flow India.
Know exactly where you stand.

The five most common causes of cash flow problems in profitable Indian SMEs: (1) Long debtor days — customers taking 60–90+ days to pay while you must pay suppliers in 30 days or less; (2) Inventory build-up — cash tied in slow-moving raw material or finished goods; (3) Government buyer concentration — government customers pay slowly (90–180 days), creating structural cash flow gaps; (4) Rapid growth — faster growth requires more working capital investment before collections catch up; (5) Over-trading — taking on more orders than your working capital can finance without adequate banking facilities. Each cause requires a different intervention.

A 13-week (3-month) rolling cash flow forecast is a week-by-week projection of all cash inflows (customer collections, loan disbursements, other receipts) and all cash outflows (supplier payments, payroll, EMIs, tax payments, operating expenses). It is the single most important financial management tool for SMEs because it provides advance visibility of cash shortfalls — typically 4–8 weeks before the shortage actually occurs. This advance notice allows you to accelerate debtor collection, arrange short-term finance, or delay discretionary spending before the crisis hits. IBEAN's Virtual CFO produces and monitors a 13-week cash forecast as part of the monthly MIS.

Practical approaches to reducing debtor days for Indian SMEs: (1) Structured collection process — automated payment reminders at 30, 45, and 60 days past due, with escalation to senior leadership at 60+ days; (2) Early payment incentive — 1–2% discount for payment within 10 days; (3) Invoice factoring or bill discounting — sell your receivables to a bank or NBFC at a discount to get cash immediately (typically 1–2% cost per month); (4) Tighter customer credit terms — reduce credit period for new customers from 60 to 45 days; (5) TReDS — if you supply to MSMEs or large corporations, TReDS platforms (RXIL, M1xchange, InvoiceXchange) allow invoice discounting at competitive rates.

Working capital finance options for Indian SMEs: (1) Cash Credit (CC) / Overdraft (OD) — revolving credit facility from your bank, secured against book debts and inventory; interest on utilised amount only; typically the lowest-cost working capital option; (2) Bill discounting — discounting of receivables against specific invoices from creditworthy customers; (3) TReDS — trade receivables discounting through SIDBI-promoted TReDS platforms for MSMEs; competitive rates (8–12% pa); (4) Invoice factoring from NBFCs — higher cost but faster and less documentation than bank facilities; (5) CGTMSE-backed working capital CC — for MSMEs without adequate collateral for traditional CC facilities; guarantee coverage up to ₹2Cr.