Impact of E-Way Bill on Your Working Capital Management

Posted by Anuj Pandey on February 14th, 2018

Ever since its proposal, E-way bill has generated a lot of debate. While some questioned the lack of IT infrastructure for its implementation, others felt it would improve the turnaround time, so essential for fast moving of inventory. With E-way bill becoming mandatory for transport of taxable goods exceeding Rs. 50,000 from 1st February 2018, let’s see how this new billing system would impact your working capital.

Longer Turnaround Time

A longer turnaround time is a bane for any business. One of the fundamental reasons identified behind the restricted movement of goods is the way VAT authorities obtain bills. Not only it leads to a longer turnaround time but also blocks inventory movement, thereby hurting your working capital. It also have the potential to affect the growth of Business Credit in the country as extended turnaround time complicated the calculation of debt servicing schedules.

However, turnaround time is expected to come down to a great extent with the introduction of E-way bill. With the introduction of this bill, let’s say a truck carrying your consignment from Delhi to Mumbai can make 4 trips instead of the earlier 3, thereby, offering an improvement in efficiency by 33%.

Quick Movement of Inventory

The domino effect of a reduced turnaround time will be on inventory movement. Quick clearance of your existing inventory improves sales, which has a direct impact on revenues. Shoring revenues boost working capital, thereby helping you to maintain a positive cash flow.

Also, you can stock up your warehouse with goods and items that have seasonal demand. It, thus, plays a crucial role in bolstering revenues and improving your working capital.

Helps in Building a Strong Bond with Customer

In the modern era, customers prefer companies offering prompt services. Quick delivery of goods within the stipulated time plays an essential role in building customer loyalty. Loyal customers are crucial for your business to expand and grow which has a direct impact on your working capital.

With E-way bills resulting in lowering turnaround time, the same would help you to serve a wider clientele with utmost efficiency. Prompt and quick services are a great advertisement for your business that will have a positive impact on working capital in the long run.

Reduction in Administrative Burden for Your Logistics Provider

With its compulsory closing mechanism from consignee on the delivery of goods at the proposed destination, e-way bills will cut down the requirement of paper acknowledgment. This will significantly reduce the administrative burden on your logistics provider.

You can receive some benefits of this reduced administrative burden in form of lower payment to your logistics provider for sending your consignment. The money you save will improve your working capital.

As evident, E-way bill will expedite the movement of goods across the value chain, thereby, influencing the bottom line of your business. Seamless movement of goods will cut down high turnaround time, result in quick clearance of inventory and help you serve a larger clientele. In other words, it will act as a catalyst for your working capital and revenues.