Tips For Timely Payment from your Buyers

The MSME sector, despite being the growth driver for the Indian economy, is suffering from multiple challenges, hindering their growth and sustained business. From lack of digital adoption to difficulty in getting finances, there are many challenges that the sector faces.

However, the biggest challenge remains the default payments by their buyers. As the sector majorly operates on credit mode of payment, there have been many instances where the buyers either delay the payment or completely default on the payable amount, thereby, creating a lack of money and effecting the entire business cycle.

Although the Micro, Small and Medium Enterprises Development Act (MSMED), 2006, is an attempt by government to safeguard the payments of MSMEs and make buyers adhere to the deadlines, here are some ways by which MSME entities can reduce the risk of payment issues by their buyers:

Well Written Contract

Every sale you do, should be governed by a written contract, and drafted by an Attorney.  It means yours Deliverables, Quality of product or services, Quantity, Time Frame, Dispute Handling and Payment terms, Delayed Payment charges etc should be mentioned clearly in your contract. A single weak statement can create problem in your business. Therefore, entrepreneurs must focus on a well written document to avoid various future problems. Having a well-defined agreement between supplier and the buyer, clearly stating the payment terms and subsequent penalties, is very helpful in assuring the smooth order processing and money flow. The MSME Development Act also defines the guidelines to keep the business out of risk, but it should be properly consulted while drafting the agreement between both the parties.

Check the Payment History of your Buyer

At first check the track record of your buyer. If the buyer has good payment behaviour and track record in timely payment to other vendors, there is a great likelihood that he will pay you too on time. There was no place where the entrepreneurs can conduct this check of their buyers. Hence, NoDefaulters.com has started this facility to be a game changer as the Business Protector for entrepreneurs particularly MSMEs.

Provide a Delivery Acceptance Letter

It works as a Proof or Record for your delivery services. This paper you can also use in further communication like Time of Delivery, Name of Recipients, and Satisfactory receiving etc.

Invoices

While issuing the invoice to your buyer, Terms & Condition should be mentioned clearly on the face of it. It is also to ensure that invoice is well received by the concerned person including the stamp of the buyer company and date of receipt. MSMEs should also ensure to get their Udyam Registration mentioned on the invoice.

Follow-up with the Buyers

To maintain regular Cash flow and Profit, there is a need of consistent follow-up or continuous communication through e-mails, business chat messages, calls etc. Cash flow is very important to run a successful business as it gives you purchasing power and helps entrepreneurs to sustain in the market. Having less skilled staff and more paperwork mode of operation, the follow up for payment are often delayed from the supplier side. Having a rigorous and timely follow up habit helps in timely reminders to the buyers and clearing dues within the agreed timeline.

In case there is any delay in payment by your buyer, nodefaulters.com will take care of consistent follow up with your buyer for timely payment on your behalf.

Incentivize the Timely Payments

If your buyer gives you early payment, you may pass on some incentive, if your cash flow and margin permit.

Legal Support

When it is not easy to get back your money from the market; you should take timely legal help.  NoDefaulters.com is ready to help you to provide all legal support be it conciliation, negotiation, arbitration. NoDefaulters also assist you in case filing with Micro and Small Enterprise Facilitation Council, Insolvency & Bankruptcy Code, Civil Suits etc.

Create a digital ledger

Often, the MSMEs rely on the old school methods of accounting, which involves a lot of paperwork and make the process of account reconciliation and payment follow up very tedious. Therefore, adopting digital accounting software can easily prompt the pending dues by buyers and can also send reminders in case of missed deadlines.

Reduce the credit

Credit based business has been the backbone of the MSME sector since decades. This practice keeps a wide scope of payment defaults beside keeping the orders in rotation. To reduce the payment issues, the entities should keep the credit limit in check and should also keep a tab on the regular defaulting buyers.