Making Receivables Collection easier for SMEs

Below are some of the key solutions outlined by LocalCircles members on what should be done by the Government to make receivables collection easier for SMEs and Entrepreneurs. Kindly review and if you have specific solutions to suggest, please do so. We will then share the same with key stakeholders so actions can be taken in this regard.

Making Receivables Collection easier for SMEs

1. Government should make some guidelines about the payments to be received by SMEs
2. The deliveries done by the SMEs should be insured (with premium charged)
3. Dishonouring contracts should be made a strict legal offence
4. There should be a law that 50% of the order should be paid before its execution
5. Penalty should be imposed, if the full payment is not made in the credit period stipulated
6. Payment to small entrepreneur must be settled by corporates within a maximum period of 60 days
7. SMEs should have a rating platform where they can rate corporates on doing business and on time payments
8. Government should prepare a list of regular defaulters and take action against them
9. A small scale enterprise should ensure that the suppliers and buyers are educated of their business, capacity and terms & conditions
10. Banks should look at the payment track record of the companies before giving them loans
11. New businesses could hire BBA/MBA interns to facilitate in planning their credit sales and realisation of bills
12. Cheque bouncing cases should be considered as criminal offences with serious repercussions for the errant parties
13. Penalty for delay in payments should be twice that of cost of finance
14. All the entities who have been convicted in a cheque bounce, or payment default case, in last 5 years should be enlisted onto a portal
15. Every SME, who is listed with departments like ROC, IEC, and similar other organizations, as per his need by filling a necessary online form, should be able to generate an access password for himself to check the credit worthiness of any entity with whom he is starting business
16. An environment should be institutionalized where suppliers make supplies against confirmed irrevocable Bank Guarantees
17. There should be a clause in the invoice which entitles the supplier to walk in and collect the goods supplied and make up the deficiency by commandeering other assets. more  

View all 24 comments Below 24 comments
Unethical practice by wealthy Businessmen making the balance Industrialists suffer from delayed payments and even bad debts . Credit marketing and Cash marketing policy is to be codified for a Justified Business over all in the Country . more  
If the receivable is taxable, and the biller did not receive the payment, they can file a new "i-10 form" asking the GST authority to collect from the customer more  
The outstandings to SME's should be automatically cut from the working capital limit to the erring organization. And this should be paid directly by bank to the SME a day after say 60 days credit limit and informed to the erring client. more  
Dear sir,
Suggestion is good but not practical. Customers play upper hand & shall give orders to the parties with more payment time.Putting legal pressure is out of question. We are facing such problems. Problem is from suppliers to GOVT departments. Eg Electricity boards. Such depts pay after 180 days or more. Hence if we supply to such industry we are gone. This should be availble to govt departments too. more  
I do not believe that any form of Government Regulations can enhance receivables of SMEs and yes it will definitely open up the doors for corruption. SMEs need to operate with commitment and as per the agreement arrived with the second party. In case the second party does not honour the agreement terms of payment the second party should be heavily penalised and debarred from carrying out the business further and its assets placed as guarantee should be encashed with immediate effect. Risk mitigation clauses must be placed in agreements considering the values of bi-party agreement. more  
Good suggestion. If law is there at least we can fight. Under MSME act we can approach MSME council for delayed payment. Where the buyers has to pay 3 times interest on dues. more  
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