Everything you’ve ever wanted to know about working capital

When you start your own business, and don’t come from a finance or accounting background, there are certain terms that you must learn and working capital is one of them.

What is it exactly? Let’s take a look…

Working Capital can be understood as the measurement of the operating liquidity of a company.

Why is important?

This is important as it allows startups to:

  • Borrow
  • Increase their share value
  • Meet short-term debts
  • Pay expenses

Working Capital is essential acts as the lifeline of the company when there are limited options for startups to finance themselves and move past their breakeven point. It is a measuring tool that gives insights into a company’s financial structure.

The five sources that startups use to procure working capital are:

1. Utilising venture capital: With Venture Capital funds, you are assured a sizeable investment and the best mentorship in the business. This enable you to plan how you can scale your business. Venture Capital is best suited for small businesses that are looking at expansive growth. Though VCs look to help your company grow, they also look to capitalise on their investments.

2. Raising equity: A good way for your business to become profitable is through issuance of equity and short-term working capital funds. When your personal finances diminish, equity shares will create the required capital necessary to help your business grow. You need to determine the rate of dividend per share based on the profits earned. This allows a business to reduce their financial burden but you will need to give up some company ownership.

3. Discounting Bills of Exchange: When your goods are sold on credit, you can draw a bill of exchange for goods that are sold. These bills of exchange include the acceptance by the buyer to clear the bill on the date of maturity. Your firm can discount these bills of exchange with a commercial bank for a bank discount. This will help you raise finances when payments are due for a cost against the bill of exchange that you make with the bank.

4. Acquiring short-term notes: When you establish a good relationship your bank and they are willing to provide you with a short-term note based on inventory, orders and future receivables. This is undertaken by the bank against a guarantee that is issued by the borrower against a collateral for business needs only.

5. Building a line of credit: Most banks do on not offer a line of credit to new entrants but exceptions are made for businesses with a good equity and sound collaterals. A line of credit provides startups the funds needed for short-term needs. These funds are repaid when the accounts receivables have been collected.

 The benefits of having a sound working capital strategy is that banks provide funding based on assets that will be purchased and expenses that would be covered. Letters of credit are given as a guarantee for non-funded facilities that are made on credit and available in the local and foreign currencies. By having a sound command over your working capital, you can control your operating expenses, purchasing inventory, receivables financing, either by direct funding or by issuing letter of credit and other similar instruments.

Start-up Costs your Business needs to take into Account

It’s great starting up on your own and finally getting your business plan off the ground! But before you know it, you could run out of steam. Your budget and financing will decide the course of your business so it important to analyse you initial expenses and avoid stumbling on the way.

Gauge Your Start-up Expense:

Before you draw a budget for your start-up costs, evaluate your business requirements. Once you know how your business needs to be set up and run, you can chalk out the two types of expenses – one-time and periodic. Base your expenses on a yearlong plan that takes into account changes that may occur in the market. Avoid optional expenses and concentrate on absolutely essential resources – employees, office space, and equipment – with quality output. This will help you also cover expenses quickly with a profit margin. Your start-up costs will help you get a clearer sense of your cash flows and you can adjust your payment cycles accordingly.

Now, let us take a look at four costs you need to be aware of as you set out to be the boss of your own business:

1. Setting Up:

Setting up your office is the next step in getting your start-up going. You will need to consider the following expenses while setting up your business physically:

  • Purchasing/renting/leasing an office space along with basic furnishing
  • Purchasing one-time office equipment
  • Buying softwares and digital tools for all your business works
  • Setting up communication needs like internet and phone lines

These are one-time costs that you will incur in the first year of your business, after which maintenance costs for communication, softwares and office space may arise. These are essential expenses that you cannot ignore so make sure that you are backed up well by your finances.

2. Resources and Vendors for your Business:

To get your business working, you will need resources – a team that will see you through in delivering every little aspect of your business. Always review who you hire and don’t make the mistake of expanding your team too quickly in the initial phases. A small team with good deliveries is more impactful than a larger workforce with average returns. Hire the essential ones but make sure you pick the best ones. For periodic business operations, you can even outsource your work or hire freelancers to do the job. Do not compromise on paying extra for quality staff as they hold the potential to give your business huge turnovers.

3. Estimated Cash flow and Recurring Expenses:

While starting a business, it is often hard to recognize how your business will progress. Operational costs, however, will keep running and you will need to take these into account as part of your initial costs. These will include utility bills, employee salaries, software registrations, and employee benefits. Besides, you will also need to consider a range of miscellaneous expenses that may arise, such as – travel costs, communication reimbursements, insurances, etc. While assessing your recurring expenses, estimate your cash flow and possible turnovers every month. This will help you determine how much amount to set aside from your start-up capital.

4. Promoting Your Business:

Once your business is set and existing, your consumers and clients will have to be made aware of your presence in the industry. Initial marketing costs will include:

  • Name and branding
  • Outdoor promotions like posters or hoardings
  • Digital promotions like social media ads, SEO, and sales campaigns

Your promotional content should include what makes your business different and what your prospective customers should take notice off. If you choose to outsource your advertisements, ensure that you message is clear and your product gains the right amount of visibility to leverage paying customers.

By determining these costs, you will be at a better position to review payments that should be made and spend on those that provide a significant change to the business. With these guidelines in place you will be in the best possible position to have a check on payments and smoothly get your business off the ground and running.

What’s new in numberz this December

 

Expenses Redesigned

 

Let numberz help you spend smartly with these new additions :

 

  • Managing Bills is quicker than ever. Enter quick bills without clicking anywhere else – fast and painless! You can also add quick bills in bulk mode too – in a jiffy. And the Automagic bank connect works well still!
  • The all critical Vendor bills (with more information) got a new look – same as that of invoices.
  • No more searching for bills on the next page. You can easily view all the bills in one page with infinite scrolling!
  • Recurring expenses need not bother you recurringly. Just set them up on numberz and they are created automatically!

 

Simplified Banking :

 

Banking on numberz becomes more rewarding – and secure!

 

  • Keeping your transactions secure – and yet convenient – will always be a priority for us. We  have now added support for multi factor authenticated banks (e.g. kotak mahindra). You can now connect to more diverse list of banks without having to worry about security. You can continue to easily reconcile your payments and expenses.
  • Infinite scrolling meets banking! You can see upto last 500 transactions without even going to the new page!

 

Power of invoicing

 

Invoicing gets a shot in the arm!

 

  • Now users can add miscellaneous charges such as transportation charges, installation charges etc.
  • To ensure that the invoicing continues to be accurate, users will also get a warning message for duplicate invoice numbers.
  • Payment terms got more flexible. Choose between additional payments terms of 7,15 and 45 in addition to the ones available.
  • And if you are recommending numberz to your fellow business folks, we made the first time experience on numberz super nifty! So go ahead – get some brownie points this new year!

Getting a Bank Loan: It’s easier than you think!

We’ve all heard that it takes money to make money and when it comes to growing your business, this is true. When looking to grow your business, you could use your own savings, borrow from family or friends, run a crowd sourcing campaign, or take a bank loan.

Bank loans are one of the most traditional ways of getting funding for your business and in this post we will take a look at what you need to know if you are considering taking a loan. It’s all about thinking smart and finding the best one that works for you.

Step 1: What is the amount?

When you’re building your dream, it is easy to sometimes get lost in the clouds. So in step one, you need to have your feet firmly on the ground as you decide how much you actually need. A great way to start is by making a list of the expenses you might have. Talk to a friend or family member that owns a business- ask them about the costs they expected and the ones that threw them for a loop. When you know how much you will need to spend, you will have an idea of how much to ask for from a bank loan.

Step 2: Think like a banker

As an entrepreneur, it is important that you are able to see all aspects of your business from various angles. You will need to play the role of planner, innovator and finance head. While there are different technologies such as invoicing apps or banking apps that can make your life easier, when it comes to a loan, you need to start thinking like a banker. Have a preliminary meeting with your personal banker and get an understanding of what is required from you and the questions you will need to answer when applying for a business loan.

Step 3: Find Your Credit Score

If you check the website of any major bank or lending organisation, you will notice that they have eligibility calculators. These calculators allow you to check your credit worthiness or how much a bank would theoretically be willing to lend you. Before you apply for a loan, you will also need to check your credit score. You can check this with the Credit Information Bureau India Limited (CIBIL) and then share it with your lender to prove your credit worthiness.

Step 4: Get Your Documents

In the old days, getting a bank loan used to be a long drawn out process of filling out forms and building mountains of paperwork but now the system is better streamlined. While different banks might have different requirements, here are the basic documents you will need to collect:

  1. ID Proof (Passport Copy/ Voter ID card/ Driving License/ PAN Card)
  2. Address Proof (Ration card/ Telephone Bill/ Electricity Bill/ Rental agreement / Passport copy/ Bank Passbook or Statement/Driving License)
  3. Bank Statements (Both personal and for your business)
  4. Income Tax Receipts
  5. Your business’s documents such as registration, VAT, TIN certificate etc.
  6. Profit and loss statements

Some of these documents will need to be self-attested or attested by a notary. With the right finance processing and accounting software, you will have visibility on how your business is functioning and where you need to inject funds. Banks looking to give you a loan will also have transparency on how your business functions, making you a better candidate to receive a loan.

 Step 5: Know the terms

As with any business contract, you need to know the terms of the loan before you sign on for anything. In today’s world there are various loan formats that offer different terms. Some don’t require collateral or much paperwork and others have the options to submit documents digitally. It is important that you don’t just opt for the first loan offered to you or the one from your personal bank.

Follow these simple steps and you will make inroads into getting the funding your business requires.

Have you considered a line of credit?

Before deciding on borrowing money, however, consider two major factors:

  • How big is your loan amount?
  • How often do you need to make purchases (with the loaned amount)?

If you want to loan a reasonably medium or small amount and if you recognize the need to make multiple purchases along the venture instead of one bulk payment, a credit line will be a better option for you than a bank loan. A Line of Credit or Credit Line is an overdraft account without the hassle of collateral. It is a great choice for filling in financial gaps in your expenses, with more convenience than loans.

A credit line works very similar to a credit card:

  • A credit limit is set for you, which you can borrow entirely or in parts according to your needs.
  • The interest rates are variable and applicable only on the amount borrowed.
  • You can secure a higher credit limit by submitting collaterals.

So, if your venture is about small transactions in steps rather than one bulk investment, choose a credit line which will help you:

  • Avoid paying extra interest for unused money.
  • Use amounts as per convenience.

 Want to apply for a line of credit? Click here to learn how through Numberz.

GST Checklist

GST Checklist

The procedure for registration for GST system portal is as follows

 1 – Paperless procedure: The whole system of registration will be paperless; hence no hard copies shall be accepted by the department. Further, all the aforesaid registered taxpayers will need to visit the GST portal.

Further, it is mandatory for every entity to register for GST, if the turnover is more than 20 Lakhs – the exemption limit.

 2 – Provisional ID and password: Business entities must obtain provisional ID and passwords which are provided by your concerned state authorities.

3 – Documents and Information required: Be ready with these to get GST ID.

For the process to go hassle free for you, please ensure that the following information is handy.

  • Provisional ID as explained in point 2.
  • Password as explained in Point 2.
  • Valid email Address (it should not be off professional – Use your own email ID)
  • Valid Mobile Number
  • Bank Account number
  • IFSC code

Please ensure the following documents are available with you in digital format as per specification mentioned.

  • Proof of constitution of Business:
    • In a case of Partnership deed – Partnership deed (PDF or JPEG in the maximum file size of 1 MB).
    • In a case of others: Registration Certification of the business entity (PDF and JPEG format in a maximum file size of 1 MB).
  • Photograph of Promoters/Partners/Karta of HUF (JPEG format in a maximum file size of 100 KB).
  • Proof of appointment of authorized signatory (PDF and JPEG format in the maximum size of 1 MB).
  • Photograph of authorized Signatory (JPEG format in a maximum file size of 100 KB).
  • Opening page of Passbook/Statement containing the following information:
    •  Bank account number
    •  Address of branch
    •  Address of account holder
    •  Few transaction details  (PDF and JPEG format in maximum file size of 1 MB).

Documents may slightly vary for you, Please see as per your registered company.

Additional Documents as per your legally registered entity are mentioned below:

OPC (One Person Company):

  • MOA/AOA and Certificate of Incorporation of Company
  • Mobile no and Email Address of Applicant Director and Nominee Director

Private Ltd Company/Public Limited Company:

  • MOA/AOA and Certificate of Incorporation of Company

Partnership Firm:

  • Partnership Deed of Firm

LLP (Limited Liability Partnership):

  • LLP Agreement and Certificate of Incorporation

Trust/Society/Section 8 Company:

  • Bye laws / Moa of Organization

Looks cumbersome task, you can connect with NUMBERZ and enjoy hassle free registration with us.

 

Who Are You Banking With? Choose the Right Bank for your Business

Managing your finances in the first year of your business can be tough but the right bank can make all the difference.  With many banks who have the services you need, the two questions you have to answer are:

– How do I pick the right one?

– Who is giving me the best of services?

Gone are the days of mountains of paperwork, banking has also become a seamless aspect of our life thanks to digital services.

Here are five things to keep in mind while selecting the right bank for your start-up:

1. Business Costs and Cash Flow:

The first thing that you need to do while setting up a business is assessing your costs. Analyse your financial needs and choose a bank that provides services that will benefit you the most. Oh, what a headache, right? Let’s make it simpler – as a small business, you need to consider three aspects – start-up capital, growth capital and cash flows.

So, remember these factors and choose a bank that will offer you these services:

  • Range of business loans such as starting capital, equipment loans, expansion loans, etc. with:
    • Shortest application and approval times with easy online applications and verifications
    • Attractive rates of interest
    • Automated EMI payments and reminders
  • Suitable account-based services, such as:
    • Digitised account management, creation, and deactivations
    • Stock market and investment insights as well as advice
    • Liquid accounts with minimal costs
    • Easy, online fund transfers and payments
    • Automated online transactions

2. Banking Services:

Banks have become more customer-friendly and I’m sure they have made your lives easier too. But, we all know how banking works now – there are innumerable services offered by each bank! So how do you find the right one? The first step is to look for a bank which will allow you to digitally conduct most of your banking and financial needs.  

Internet banking has made our lives so much easier – fast-paced transactions, online applications and verifications, automated payments, account management, rapid assistance, and much more! For example, certain banks allow you to add a payee in 30 minutes with almost immediate fund transfer – a great way to save time and keep suppliers or vendors happy. Some other banks have rapid loans and payment approval timelines which reduces the time spent on banking and also, makes it convenient.

3. Banking Expenses:

We all know how banks charge for transactions and accounts. But, if you don’t keep a check, you can end up losing a chunk of your revenue in banking expenses! To avoid that, identify a bank that can offer you services at nominal costs, which include:

  • Transactions, payment getaway and bill payment charges
  • Account maintenance and creation – minimum deposit ledgers, deposit and withdrawal charges
  • Loans, mutual funds and investments – application charges, interest rate, premature and late payment charges
  • Credit/debit cards – application charges, interest rates, late payment charges

4. Terms of Usage:

Based on the services that you essentially require, choose a bank with operations and regulations that best suit your needs. Carefully review all terms of usage before choosing a bank to keep a check on, such as:

  • Unnecessary charges and procedures
  • Risk factor
  • Account liquidity criteria
  • Availability of services

Opt for a bank who will keep digitally updating you with changes in policies and regulations – through emails, SMS or push notifications on apps.

5. Size Matters:

Make sure you plan for the success of your business and choose a bank that can fulfil your future needs too. For example, you will not have to pay extra for ATM usage or foreign transactions when opt for an international bank. Alternatively, large-scale banks, whether national or international, will be able to assist you better with business growth and expansion scenarios.

When you are looking out for the right bank, don’t simply select the first one that approaches you. Go out there and find the one that fits your needs and understands you in a manner that helps shape your financial journey. After all, your business is your castle of dreams!

Think Registering Your Business will be Tough? Think Again!

When most entrepreneurs remember starting up- they think of the running around, the stamp paper and waiting at government organisations.  But now with the Digital India initiative, you can now register online from the comfort of your home. The process has been massively streamlined and the main registrations include Digital Signature Certificate(DSC), Director Identity Number(DIN) and filing for the final eForm.

Are you looking to register your business? Park your attention here as we take you through the four registration steps:

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Step 1: Get your Director Identification Number (DIN): When registering each director of the company, you need to get identification numbers created. This can be done by filing and submitting the DIN-1 form that is available on the Ministry of Corporate Affairs website.

Step 2: Sign up for your Digital Signature Certificate (DSC): Your documents will only be received when you authenticate your documents with digital signatures. These Digital Signature Certificates must only be acquired by agencies appointed by the Controller of Certification Agencies (CCA). The DSC is only valid for two years and on expiry, you will need to renew it.

Step 3: Register an account on MCA Portal: Online fee payments can be made available and you can register when filing the eForm on the MCA Portal. All you’ve got to do is create a registered new user account, and good news, the creation of the account has no charge!

And Finally, Step 4: Apply for company registration: The final step to register your company is when you incorporate your company name, address, appointment of directors and staff and the qualification of shares. To get the final approval from the Registrar of Companies, you have to obtain the certification of incorporation with Form-1, Form-18 and Form-32.

What do you have to do to incorporate your company? Follow these steps:

  1. Filing of Form 1 for reservation of name
  2. Filing main Papers I.e. Form 7, DIR-12, INC-22

All steps require a set of formalities and procedures you will have to compile and submit as mentioned below:

  1. For DSC, you require 1 photo each, copy of PAN Card, copy of address proof.
  2. For DIN, you require 1 photo each, copy of PAN Card, copy of address proof based on the name and credentials that match with the PAN details. Also, a set of affidavits are required to be prepared and shared with all legal formalities required.
  3. Name approval requires you to confirm 3 names in their respective order of preference. Name allocation is subject to availability.
  4. Main forms and other forms include a well drafted MOA/AOA, and recent affidavits, declarations and all legal formalities. The address proof of the registered company must be submitted.

Ensure that these documents are reviewed before submission:

  1. Director Identification Number
  2. Digital Signature Certificate
  3. Original copy the of formal letter issued by Registrar of Companies on Company name: Form-1 for incorporation of a company, Form-18 for situation or address of the proposed company, Form-32 for particulars of proposed directors, managers and secretary

When the application has been approved by the MCA, you will receive an email confirming the incorporation of the new company and status of the form will change to Approved. Wooohoo! You’re done.

The Ministry of Corporate Affairs has incorporated INC-29 which combines DIN, Name Approval application and Incorporation Application.

Next Steps, your company is formally incorporated when you obtain the TAN Card, PAN Card, STPI registration and valid Digital Signature Certificates. So, what are you waiting for? It’s time to start your dream business!

Also remember to check out what Numberz can do for you once you start up, to smoothen out your accounting and invoicing procedures!

 

GST and YOU

 

Our government has taken a paramount step in the direction of reforming the age-old tax regime. All taxes are to be subsumed into one amalgamated tax GST. The SMEs and startups are rejoicing, as the new taxation system is deemed to bring much-awaited relief to entrepreneurs and businesses.

According to the govt. GST will increase “Ease of doing business” and “Unleash the animal spirit” of startups. GST could pump the much-needed fuel that the startups are starving without. Let’s have a look at how GST is going to affect new and existing businesses.

Starting your business was never easier: In the initial stage of starting a business, every business need to have a VAT registration. In India, every state has its own taxation procedure. It could prove hassle- some for a person trying to start his new business. With 100 of problems already with the businessman, related to starting a business. This tiresome bureaucracy does not help one bit. But, come GST this will all be streamlined.

No distinction in sales and services: Businesses like restaurants have to pay VAT for sales and services separately. This makes the whole process of computing tax very complex. After the introduction of GST in April, both are to be calculated together as one.

A brief sector wise impact of GST:-

1.Automobile:

Positive: The current effective tax rate levied on this sector ranges between 30-47 percent. This is expected to mellow out to 20-22 percent. GST will spur growth in this sector, as the end user is expected to enjoy a reduced cost by 10 percent.
Negative: Commercial vehicle market may take a hit due to this. GST will eliminate local taxes, quicker passage through check posts, reduce logistic overheads. Improved efficiency with current capacity, operators may delay their expansion plans.

2.Consumer Durable:

Positive: Implementation of GST is big boost for consumer durable industry as also for makers of building materials. New tax regime will lower the end prices of products as manufactures are likely to pass on the price benefit. Also it will reduce the price gap between organized (branded) and unorganized (unbranded) market players. Reduction in logistic overheads will also lower the end cost

Negative: Manufacturers have to watch out for whether benefit is applied to excise duty exemptions zones or not. If not then production units in such zones will incur higher cost and will increase the cost of end product.

3.FMCG:

Positive: Companies will be saving substantially in logistics and distribution costs as there will be no need for multiple selling points. FMCG today pays nearly 24-25% tax including all components. Once GST comes in the picture it will be lowered to 17-19%.

Negative: As per recommendation of GST council, there is 40% tax on “demerit” products which includes aerated beverages and tobacco products. Prices may surge by 20%.food companies enjoying concessional rate of excise may be affected.

4. Cement:

Tax rate is expected to drop from 27-32 percent to 18-20 percent. So, companies in this sector should prepare themselves for increased demand and growth. A company currently running 550 depots can bring down to 100 depots.

 5. IT & ITES:

Positive: GST will eliminate multiple levies for IT companies. It will also allow deeper penetration of digital services.

Negative: Tax rate in this sector is 14 percent, after April it is expected to surge to 18-20 percent. Companies in this sector might prepare themselves to take hit revenue wise. Also IT companies mostly work on same project from different data centers. Hence each center will need to generate separate invoice for every different project they have taken.

6.Telecom

Positive: Cost of mobile handsets and laptop will eventually come down.

Negative: Call charges and data charges are bound to go up if GST regime exceeds 15%.

7.E-commerce

Positive: Reduction in logistic cost and whole country as one unified market will reduce the end cost for consumer. Cascading effect of taxes will be also be eliminated once GST is implemented.

Negative: TCS (Tax collection at source) will increase the administrative, documentation workload for eCommerce companies.

You need to prepare yourself for this historic change, whether you are on the gaining side or the losing side. If you are on the gaining side, tighten your belt as the demand is going to surge with the 7th pay commission and GST pumping disposable income into the economy. With GST everyone will be a winner in the long run.

How to sync your numberz data to Tally

 

Prerequisite steps for using Tally Sync – 

  1. You should be registered with numberz. 
  2. Download Tally sync for google chrome plug-in from here
  3. Should also have Tally installed on the system.

Step:1 Open Tally in the background with the company details updated. Now login using the same credentials you use in the numberz –

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 After login, you should be able to see the invoices and debit notes in the plug-in.

Step 2: Customer name(Sundry Debtors) and Item name(Stock Item) will be automatically created in Tally. User can also manually create Sundry Debtors and Stock Item manually. It automatically updates in numberz when user refreshes the page. 

Click Account info → Ledgers→ Display→ You  can see create Sundry debtors,duties and taxes, Sales account.

Click on create to add any of the mentioned ledgers. Click on Alter to delete and edit the ledger. 

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Step 3: Click on create mandatory fields and select any of the Sales Account, Sundry Debtors or Duties and Taxes. 

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Step 4 : Click on Inventory info → Stock items→ here also you can create, display and alter for the Stock item.

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Step 5 : Now you need to add the details of Name and Units. Unit of measures should be created before accepting.

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Step 6: In the chrome plug-in window, click Setup and navigate to taxes in the top bar. Your Tally’s duty and taxes should be same as your tax types and rates in numberz account. 

Note : This is a one-time setup. Once you finish the mapping, you can sync all the data back to Tally.

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Step 7 : Navigate to the Stock Items where you can set up the item line and numberz tax will automatically get mapped to the particular item line in Tally tax.

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Step 8 :  Click on Sync To Tally in left panel. You can now verify that your invoices and debit notes are present.

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Step 9 : Select the invoices which you want to sync to the Tally server and Click on Sync to tally.  The invoices will get automatically merge in the tally server under the selected company name.

Click Display → Trial book. You can see all the synced invoices from numberz

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Congratulations ! You have synced all your invoices and debit notes to Tally

 

Get paid faster

For any business, sending timely invoices and offering easy payment options is the key to get paid faster. Numberz helps you create professional looking estimates & invoices from easy to use templates & send using mail.

Just in case you need it , we have also given the option to follow up on pending invoices. And since everything is online, you can check the payment status anytime, anywhere. Once you get paid, you can easily reconcile invoices from bank transactions.