With MSMEs currently contributing to around 40% of India’s exports and 45% of its manufacturing productions, there is no doubt of the rise in a number of startups and businesses.
Numerous government aids and subsidiaries have further aided the cause with easy availability of loans as well as tax exemptions.
The rising number of budding entrepreneurs can be expected to directly contribute to India’s GDP as well as the employment ratio.
Understandably, it is important these upcoming business owners learn of the vital terms related to a business venture.
Understanding financing options, supply chain meaning, accounting methods for taxation, etc. are vital to be a successful entrepreneur in 2020.
A clear knowledge of the terms discussed below can help entrepreneurs not just with the functioning of their business, but also in availing business loans for expansion and their repayment.
Accrual basis
This is one of the accounting methods which are used by business organisations to understand if a transaction is taxable. In this method, income is calculated on the basis of invoices and not the actual payment.
Accrual basis suggests that every transaction is taxable irrespective of whether the payment has been completed or not.
Annual Percentage Rate
This is the total yearly cost of repaying a loan taken by a business venture and must be checked before availing supply chain finance for a company.
This rate does not just consider the rate of interest which is levied on loan repayment but also takes into account the other fees which are levied on the repayment. This rate allows a business to assess its repayment expense and plan accordingly.
Cash basis
The second method for accounting, cash basis is widely used by most MSMEs and small businesses. In this method, transactions are only reported when the actual payment is completed.
Understanding supply chain meaning can help in understanding why smaller enterprises prefer this method over accrual basis.
Equity financing
Among the common options for financing a small business, equity financing can be a very viable choice. In this method, a share of a business venture is sold to another investor.
The cash influx helps in maintain the supply chain and the workflow. Small business owners often opt for this option while expanding their business venture.
Supply chain management
Supply chain meaning refers to the network between different businesses on one hand and their vendors and suppliers on the other.
Understandably, this is network is vital to maintain the production chain and functioning of a business. Supply chain management refers to the mechanism which is employed to manage this network.
Supply chain financing
Often it is vital to finance the supply chain to maintain the workflow. Due to payments, large scale orders, and many other reasons can lead to such a situation. In such cases, a company can opt for finance themselves by availing loans, opting for equity or invoice financing, etc.
Coming under supply chain management which every businessman should know, this is necessary to maintain the production chain and supply logistics of a company, and not being able to avail it can be detrimental to a business.
Working capital
The difference between the available assets of a business venture and its existing liabilities constitute the working capital of a company.
Also termed as net working capital, this difference is the liquid asset which a company can use for supply chain finance.
There are numerous financial institutions and investors who offer financing options to business ventures to maintain their working capital.
NBFCs like Bajaj Finserv even provide pre-approved offers which make the loan application convenient and prompt for applicants.
Along with supply chain meaning and related terms, it is also advisable that entrepreneurs look up tax exemptions offered by the government of India. Availing these benefits can effectively increase the profitable revenue further in every business venture.