A customer has not paid: what a small business can do
Chasing late payments is awkward and tiring. A practical order of steps, from a friendly reminder to the options a micro or small supplier has under Indian law.
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Late payment is the most common cash problem a small business has, and it is made worse by embarrassment. Many owners wait weeks before asking, then ask angrily. A calm, early, documented process works better, costs less and keeps the customer when the customer is worth keeping.
This article describes a sensible order of steps. It is not legal advice: confirm the legal points with a lawyer or chartered accountant, especially before sending a notice.
What you should come away with
- Ask early and in writing; most late payment is neglect, not refusal
- Agree payment terms before you start, in a document the customer has seen
- Escalate in steps, and keep every message and record
- A micro or small supplier may have special rights; check yours with a professional
- Do not keep supplying a customer who is far behind
- Count the cost of chasing before spending more on it
Prevention comes first. Before any work starts, agree the price, what is covered, when payment is due and what happens if it is late, and put that in a short written document the customer has seen. For new customers, ask for an advance or part-payment. Send a clear invoice with the right details on the day you deliver, not a month later.
When a payment is late, ask the day after the due date. A friendly message or call is usually enough: confirm the invoice arrived, ask whether anything is holding it up and when you can expect payment. Send the invoice again, and follow any call with a short message so there is a written record. Often the invoice was lost or waiting for an approval you can help to unblock.
If that does not work, move to a firmer written reminder that states the amount, the invoice number, the due date, and a date by which you expect payment. Keep the tone professional. Stop or pause further work or deliveries to this customer until the balance is cleared; continuing to supply someone who is behind increases what they owe you.
Next, check whether special protections apply. Indian law gives micro and small enterprises that are registered on Udyam rights when a buyer pays late: a limit on how long the buyer can take, interest on late amounts, and a route to ask a Facilitation Council for a decision through the MSME Samadhaan portal. The details, including who counts as a supplier and what the time limits are, are set by the law and its rules, and they have exceptions. Ask your chartered accountant or lawyer whether they apply to you before relying on them. A related tax rule can also make delayed payment to micro and small suppliers costly for the buyer, which is sometimes a useful reminder to a large customer.
If a cheque bounced, there is a separate legal route with strict time limits, so speak to a lawyer straight away rather than waiting.
Finally, think about the arithmetic. A legal process takes time and money and may sour a relationship. For small amounts, a calm conversation, a payment plan in writing, or a settlement for less than the full sum may be worth more than winning. Decide in advance how much you are willing to spend to recover a debt, and learn from each case: tighter terms, advance payments, and not extending credit to customers who have paid late before.