Why are payout solutions important? Studies show that approximately 82% of small businesses fail due to poor cash flow management.
But, why is cash flow management a challenge for businesses?
Most businesses are based on the foundation of two types of financial transactions: cash inflow (pay-in) and cash outflow (payout). Maintaining an optimum balance between them fosters efficient cash flow management. However, a business cannot do so if it is not well-versed in the basics of these transactions.
In this blog, let’s discuss one of them in depth. Read on as we define payouts and dive deep into their intricacies to unfold how they work, their significance, and everything else in between.
What are Payouts?
Payouts are a type of cash outflow. In simple words, they refer to the payments you make to different parties. This includes your customers, employees, stakeholders, suppliers, contractors, freelancers, etc. Based on their nature, these payments can be either one-time or recurring. Payout solutions help facilitate these transactions seamlessly.
Payouts include both cash and non-cash transactions. So, even when you transfer money via your current account to the concerned third party’s bank account, it comes under the purview of a payout.
Thus, payouts encompass:
- Cash payments
- Bank transfers
- Payments made through debit/credit cards, digital wallets, etc
- Payments made in cryptocurrency, and so on
One common example of a payout is paying salaries to your employees. It’s a recurring monthly expense.
Differences Between Pay-ins and Payouts
Now that you know about payout’s meaning, let’s shed some light on the differences between pay-ins and payouts for better understanding:
| Pay-ins | Payouts | |
| Definition | Pay-ins refer to the payments a business receives through different parties like customers, investors, lenders, donors, etc. | Payouts refer to the payments a business makes to different parties like customers, investors, employees, suppliers, freelancers, etc. |
| Example | Customer payments, sales revenue, investments, loans, etc, | Operating expenses, salaries, supplier payments, customer refunds, etc |
| Purpose | The main purpose of pay-ins is to allow a business to realise its cash inflows. | The main purpose of payouts is to allow a business to disburse its cash outflows. |
| Impact on cash flow | Increases cash/bank balance | Decreases cash/bank balance |
What is the significance of payout solutions for businesses?
Payouts, in a broader sense of the term, are a kind of expense. However, if you streamline them, they can provide multiple benefits to your business. For instance:
1. Efficient cash flow management
Cash flow management is important for your business’s sustenance. Inefficiency in this aspect can hamper its growth and, subsequently, survival.
However, payout optimisation can prevent this. It ensures that all your third parties—including vendors, suppliers, and customers—are paid on time, thus establishing efficiency in your business’s cash flow management system.
2. Improved financial planning
Robust payout management eliminates financial risks for your businesses. Firstly, it ensures you make timely payments and avoid repercussions such as late charges, vendor dissatisfaction, etc. Additionally, it also helps you allocate your resources and plan budgets more effectively. All in all, it makes financial planning easy and logical for your business.
3. Enhanced compliance
If your business payouts are not streamlined, you can face prominent legal issues. Punctual payouts not only ensure you comply with regulatory obligations such as tax filings, employee benefits, etc. but also avoid penalties. They also minimise the risk of lawsuits arising due to late payments.
4. Better business relationships
When you pay your customers, vendors, suppliers, etc., on time as a business, you lay the foundation of a healthy relationship with them. This helps improve satisfaction, create lasting, strong business relationships, and build a solid market reputation.
Which businesses need payout solutions?
Here are the top five industries that rely on payouts for their everyday functioning:
1. E-commerce
Online product and service sellers need a mechanism that enables them to send money instantly and in bulk. A payout solution can help them to do so. They can use it to disburse bulk vendor payments and customer refunds—both domestically and internationally. They can also use it to pay the platform charges of the e-commerce platform they use to conduct their business.
If you’re looking for a cutting-edge payout solution for your e-commerce business, Plural by Pine Labs can help. Our innovative payout solution enables online sellers like you to make bulk payments instantly and through multiple modes. For the full list of features, visit our website today.
2. Retail
The retail industry is transaction-heavy. Businesses engaged in retail trade—both online and offline—have to make payouts regularly to their vendors, suppliers, contractors, customers, and so on. A robust payout system can facilitate these daily transactions for them.
3. Gig economy
Businesses in the gig economy need to pay their freelancers on a timely basis to ensure uninterrupted operations. This is why they need a payout solution in place. Since such businesses collaborate and operate remotely, a payout solution helps ensure they make bank payments to their employees (freelancers) on time and accurately without much human intervention.
4. Crypto exchanges
Due to the versatility of their client base, crypto exchanges are required to make payments in multiple currencies. This is again an aspect where having a solid payout system helps. Since these solutions are capable of executing multi-currency overseas payments, crypto exchanges leverage them to disburse their payouts easily and efficiently.
5. Insurance
Insurance businesses are among the most common users of payout solutions. They primarily use them to disburse and settle policy claims. This helps them process claims faster and more accurately, ensuring the policyholders receive the rightful amount as instantly as possible.
Wrapping up
Payouts are the backbone of a business. By streamlining them, you can not only bolster your organisation’s cash flow management system but also maximise its overall efficiency. However, to do so, you will need a reliable solution.
In this context, you can check out Plural Payouts. It is India’s first payout solution for Indian businesses. With this tool, you can make instant transfers and bulk payments with utmost accuracy and efficiency. That’s not all—Plural Payouts also lets you transfer your payment to a variety of destinations, including cards, bank accounts, and digital wallets.
Contact us or simply click below for more details!
Plural by Pine Labs has received an in-principle authorisation from the Reserve Bank of India (RBI) to operate as a Payment Aggregator.
