How does Clear help in working capital management?

Updated on: Jan 19th, 2022 - 9:54:26 AM

3 min read

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One of the strategies to effectively manage working capital is by maximising your input tax credit (ITC) claims. In 2019, the government had introduced the concept of provisional ITC, where businesses could claim 20% ITC as provisional ITC. This limit was further reduced to 10%, then 5%, and there is an absolute restriction, i.e. 0%.

This means that ITC claims will be restricted only to the extent that the respective vendors upload their invoices and debit notes in their Form GSTR-1 or through the Invoice Furnishing Facility (IFF). These claims must then be reflected in the recipient taxpayer’s (buyer’s) GSTR-2B to claim ITC. Hence, just by ensuring that 100% input tax credit is claimed on every invoice, a task that is challenging to achieve without automation, businesses can minimise their GST cash outflows. This way, they strategically unlock working capital.

The new ITC amendment has also increased the dependency on vendors, creating a need for an automated system of vendor communication and follow-up. And in the case of non-compliant vendors, the necessity for payment holding is the need of the hour. Why should your business suffer just because your vendors don’t comply?

How does Clear help automate the ITC claim process and unlock working capital?

Clear has recently launched Clear Max ITC, India’s first solution for maximising input tax credit claims and completely automating vendor communication and payments.

Clear Max ITC offers a host of unique features that are proven to maximise ITC claims and unlock your working capital-

  • Fastest AI-based reconciliations: AI-based tools match invoices without errors and help identify 100% input tax credit.
  • Automated data reconciliations: They occur at regular intervals through direct data pulls from the GSTN and the ERP.
  • Automated vendor communication: To keep follow-up efforts with vendors at a bare minimum while pushing them to upload invoices on time.
  • Smart payment decisions synced to the ERP: The automated vendor categorisation through an intelligent vendor scoring mechanism lets you automatically withhold the payments of non-compliant vendors.
  • Advanced user access management: This helps define access rights for each team and keep your data secure.

How does Clear Max ITC work?

First, the Clear Max ITC platform forms a two-way connection with an enterprise’s ERP/accounting system. This helps schedule auto-reconciliations of the GST data at frequent intervals and sync vendor payment decisions. For example, an enterprise can set its vendor payment terms to automatically withhold the GST amount or the entire amount due in cases where the vendors have not filed their GST returns. This decision can then be synced to the ERP for all future payments.

Next, the AI-based tool runs automated data matching at frequent intervals with 100% accuracy. If any missing invoice or missing data is detected, an automated communication is sent to the vendor via email, WhatsApp, etc. Over time, the volume of defaulting vendors reduces, and ITC optimises, thereby unlocking working capital.

Clear Max ITC helps businesses reduce their GST cash outflows and increase profits by up to 7% through ITC maximisation. To know more about maximising your business’s ITC claims, please visit the Clear Max ITC website here.

This article is the last in the series ‘Understanding the facets of working capital management’.

Also read
How important is working capital for the growth of an enterprise?
Common challenges faced by enterprises in working capital management
5 strategies to effectively manage your working capital


Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

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