How to get paid faster: a receivables routine for small businesses

Slow-paying customers are the most common reason a profitable business runs short of cash. They are also the most fixable. Very little late payment is a customer deciding not to pay. Most of it is an invoice stuck in someone’s approval queue, a query nobody answered, or simply nobody asking at the right moment.

Why customers pay late

• The invoice can’t be processed. Wrong GSTIN, missing purchase order number, no proof of delivery, or no IRN where e-invoicing applies. It sits until someone notices.
• The terms were never clear. “30 days” from what — invoice date, delivery, or month-end?
• A dispute nobody raised. A short delivery or a price difference that the customer is quietly holding the whole invoice over.
• You are not asking. Customers pay the suppliers who follow up first. A payables team with more bills than cash pays whoever calls.
• Cash is genuinely tight. The rarest reason, and the one to spot early, because it means credit risk rather than process.

Measure it first

Two numbers, every month:

• Debtor days — how long, on average, customers take to pay. Our working capital calculator works it out.
• Receivables over 60 days as a share of the total, customer by customer. The free MIS template has an ageing sheet that highlights any customer where it passes a quarter.

Watch the trend, not the level. Debtor days creeping from 45 to 55 over three months is a signal, even if 55 is normal for your industry.

Prevent it at the invoice

1. Invoice the day you deliver. Every day between delivery and invoice is a day added to your collection time.
2. Get the details right the first time. Customer GSTIN, PO number, delivery reference, and an IRN if you e-invoice. An invoice the customer can’t book is an invoice they won’t pay.
3. Agree terms in writing, with a clear start date, before the first order — and put them on every invoice.
4. Send it to the person who pays, not only the person who ordered.
5. Confirm receipt of larger invoices within a few days, so a lost invoice surfaces before it is overdue.

A follow-up ladder

Consistency does more than pressure. The same steps, on the same days, for every customer:

When	What
5 days before due	A friendly reminder with the invoice attached: amount, due date, bank details.
1 day after due	A call, not an email. Ask whether there is any query holding it up.
15 days overdue	Escalate to the customer’s finance head, with a statement of account.
30 days overdue	Owner to owner. Agree a date, and consider holding further supplies.
60 days and beyond	A formal notice, and a decision on credit limits, security or recovery.

Record every contact and every promise to pay. A promise missed twice is information about that customer, and belongs in the next decision about their credit.

Short payments and TDS

A payment that arrives short isn’t always a dispute. Customers deduct TDS on many payments for services, and that amount reaches you as tax credit, not cash. The control is to reconcile customer deductions against your annual tax credit statement (Form 168, formerly 26AS) every quarter: deductions that don’t appear there are money you have lost twice.

Anything else short — a price difference, a damaged-goods deduction — should be raised with the customer the week it arrives, and either recovered or settled with a credit note. Unexplained short payments left on the ledger turn into a balance nobody can collect a year later.

If you are a micro or small enterprise

Suppliers registered on Udyam as micro or small enterprises have statutory protection under the MSMED Act:

• Buyers must pay by the date agreed in writing, which cannot exceed 45 days from acceptance of the goods or services — or within 15 days if there is no written agreement.
• On late payment, the buyer owes compound interest with monthly rests at three times the RBI bank rate.
• Unpaid dues can be taken to the state’s MSE Facilitation Council through the MSME Samadhaan portal.

Put your Udyam number on your invoices and in your terms. Large buyers track what they owe registered micro and small suppliers, and knowing you are one tends to move your invoices up the queue. The formal route is a last resort; discuss it with your legal adviser before you use it.

When to stop supplying

Every new delivery to a customer who isn’t paying increases what you stand to lose. Set a credit limit for each customer, in rupees and in days, and let the limit — not the salesperson — decide whether the next order ships. Reviewing limits monthly alongside the ageing keeps the decision commercial rather than personal.

Running this routine every month is part of our accounts receivable service: invoices raised on time, receipts allocated, the ageing published, and a documented follow-up cycle instead of ad-hoc chasing.