On 08th Nov when old INR 500 and INR 1000 rupees notes were declared as not a legal tender, the whole monetary system came to standstill. The focus point of discussion has been on current liquidity crisis faced by the common man. However lot of businesses has come to standstill because their whole supply chain is cash based.
Since government has imposed a limitation on cash transactions for next 50 days, it will be interesting to think why government has imposed these restrictions. In most of the business the credit line is 30-50 days where the goods are delivered on credit and buyer need to pay within 30-50 days. Now with the current restrictions on cash, they will not be able to do business.
One of my friends in textile industry told me that there is a spike in the yarn prices because many units were not able to work because they were not having enough cash to pay to suppliers and there was a scarcity of end product. Such business need to restart from scratch and should come up with a quick action plan to make their operations normalize.
Also going forward business will not be able to do their businesses in cash. They have to adopt the approaches used in developed economy to become compliant to new regulations. Once bad money is out, with IT and automation it will be very easy for authorities to track illicit transactions.
As I said earlier, currently business is completely stopped and you have to start your operations from start. It is right time to restart your business with best practices and hence I call it to reboot your system before 31 Dec.
Here I am sharing few quick steps which you can use to reboot your business. This will help you to overcome current cash challenges and run your business smoothly.
a) Mobile Payments: - Mobile payments are one of the easiest and fastest method to become digital. These are good for small amount of transactions and can be very useful for small business, shopkeepers and vegetable vendors. You just need to download the app like Paytm, deposit money in your wallet and get it transferred.
b) E-Wallet- An E- Wallet refers to an electronic device that allows an individual to make electronic commerce transactions. This can include purchasing items on-line with a computer or using a Smartphone to purchase something at a store. An individual's bank account can also be linked to the digital wallet.
c) Debit/Credit Cards:- Debit and credit card payment acceptance enables you to offer your customers the payment options they want. You need to have Point of Sale terminal, which will carry out the transaction. Merchant bank will charge some transaction fee and will carry out the settlement.
d) NEFT/RTGS:- NEFT and RTGS is good for large volume transactions. You need to have an online account and make payment through that. With NEFT and RTGS the money get transferred instantaneously or in a day.
e) IMPS:- The Immediate Payment Service(IMPS) helps you access your bank account and transfer funds instantly and securely. You can send money using Net banking of participating banks on an internet-powered laptop or PC and beneficiary account is credited immediately when a fund transfer request is made.
Earlier it was beneficial for a business man to do the transaction in cash. Honest businessmen faced challenges because they found it difficult to beat their prices (Price advantage due to not paying tax etc).
Now the businessman transacting in cash is facing liquidity challenges but a businessman who adopts digital transactions is able to service in this environment without any hardship.
Adopting these payment options is very easy. In
my next article I will cover these payment options in more details so that our
SME friends, retail vendors can easily implement it in their businesses.