Legal & Compliance for Business
Chasing a payment is easier when you know the order of steps
The invoice is overdue. You do not want to lose the customer, and you cannot afford to lose the money. Most owners either wait too long or escalate too fast. This session sets out a reasonable order of steps after the due date has passed: confirm the facts, remind, put it in writing, use any special route that applies, understand the basics if a cheque bounced, know the time limits, and decide when chasing stops being worth it. It is about what to do after the problem has occurred; preventing it through contract terms is covered in another session. It is awareness, not legal advice, and it promises no outcome.
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Delay does not only cost interest. It can cost the claim.
Late payment is often neglect rather than refusal, and a friendly early reminder fixes a large share of it. But a debt that sits for months can become harder to recover, and legal time limits run whether or not you are comfortable asking.
The steps here are an outline of common practice. Which ones suit a particular situation depends on the contract, the amount, the customer and the facts. This session is general information for awareness. It is not legal advice, and it does not replace a qualified lawyer, company secretary or chartered accountant, who should be consulted about a specific situation.
What the session covers
36 topics across 7 areas. Seven steps, from the first day overdue to the decision to stop. 6 apply to almost any business; the rest only in a particular case.
Step 1: Confirm the FactsBefore you chase, check your own side.5
- Was the work delivered and accepted, and can you show it?
- Is the invoice correct, addressed to the right entity and actually received?
- What do the order, quotation or agreement say about price and payment date?
- Is there a complaint about quality or delivery that you have not answered?
- Does your ledger match what you are claiming?
Step 2: A Friendly ReminderThe day after the due date, not the month after.5
- A call or message asking whether anything is holding the invoice up
- Sending the invoice again, with the amount and due date
- Asking for a specific date for payment
- Following up any call with a short written note
- Keeping every message, with dates
Step 3: A Firm Written ReminderPolite, specific and dated.5
- The amount, invoice number, due date and the date by which you expect payment
- A line that you will pause further supply until the balance is cleared
- An offer, if sensible, of a written payment plan
- Asking the customer to confirm the amount due in writing
- No threats, abuse or contacting the customer's family or employer, which can create legal trouble for you
A written acknowledgment of the debt, or a part-payment, can matter for time limits. Ask a lawyer.
Step 4: Special Routes for Micro and Small SuppliersOnly if you qualify.5
- If you are a micro or small enterprise, the MSMED Act sets a payment time limit and interest on delay
- A claim can be referred to the Facilitation Council; the MSME Samadhaan portal now directs new applications to the MSME ODR portal, odr.msme.gov.in
- Eligibility depends on your status and the facts; ask a professional before filing
- A separate session covers these provisions in detail
- Medium suppliers are not covered by these particular provisions
Step 5: If a Cheque BouncedIf it appliesStrict time limits start running within days.6
- Section 138 of the Negotiable Instruments Act, 1881 deals with cheques returned unpaid in certain circumstances, and specific conditions must be met
- A cheque is valid for three months from its date, under the Reserve Bank's rule
- The payee must send a written demand notice within thirty days of receiving the bank's return information
- The drawer then has fifteen days from receiving the notice to pay
- If they do not, a complaint must be filed within one month after that period ends
- This is a criminal complaint; see a lawyer the day the cheque returns
These timings are as stated by the Supreme Court in a 2019 judgment. Confirm the current law with a lawyer.
Step 6: A Lawyer's Notice, Mediation and CourtWhere cost and time begin.5
- A notice from a lawyer can concentrate minds, but it also costs money and can harden positions
- For many commercial disputes, a mediation step may be required before a suit can be filed; a lawyer will tell you
- A civil claim for money generally has to be filed within three years of when the payment fell due; the Limitation Act, 1963 treats a signed written acknowledgment or a part-payment as capable of starting a fresh period
- Costs, time and the customer's ability to pay all matter before you start
- Court is slow and no outcome is guaranteed
Step 7: Deciding When to StopThe part nobody likes.5
Recovering money is never guaranteed, and a customer who cannot pay cannot be made to pay by any process. A decision to stop is sometimes the sensible one.
- Setting in advance how much you will spend to recover a debt
- Weighing a settlement for less than the full amount against years of effort
- Stopping further supply to a customer who is far behind
- Asking your chartered accountant how an unpaid invoice affects your GST and income tax, since you may already have accounted for the tax
- Writing down what you will change: advances, credit limits, written terms
A sample timeline to adapt, not a rule
- Day after due date: friendly call and message
- One to two weeks later: written reminder and pause on supply
- Around a month: payment-plan offer or final written demand
- Then: take advice on the next step, with limitation in mind
- Cheque bounced: lawyer the same day
- Throughout: record everything in writing
What this session is not
- Not a legal notice or template to send
- Not legal advice on any specific debt
- Not a promise that money will be recovered
- Not about preventing the problem through contract terms, which is a separate session
- Not a commentary on any named customer or business
How the session runs
Led by a facilitator, with a qualified lawyer or chartered accountant where the topic needs one. It walks through made-up cases, clearly labelled, such as an overdue invoice from a long-standing customer, a dishonoured cheque, or a dispute about quality, and asks participants what the next step would be. Participants then draw up their own overdue list and decide what they would do for each. The facilitator reminds the room that time limits are strict and that the right step depends on the facts, and points to the official sources for the MSME portals.
What your students leave with
- A step-by-step order to follow when an invoice is overdue
- Wording and records that keep a reminder professional
- Awareness of the special routes that can apply to micro and small suppliers
- The basic timings if a cheque is dishonoured
- A general understanding of limitation periods and why delay costs rights
- A way to decide when chasing a debt has stopped being worth it
Scheduled sessions
Nothing scheduled yet
Sessions are arranged with a college once a date is agreed. Ask us and we will find the right person for it.
A student rather than a college? See what is coming up, or ask your placement team to host this.
Ask early, write it down, know your time limits and decide in advance when to stop.
Tell us who your students are and what stage they are at. Sessions are free for participants.