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Money Recovery Strategy for MSME Businesses – Experts Advice For MSME Business Owners To Recover Payments From Anyone

MSMEs and Delayed Payments-Udyamita Helpline

Did you supply goods to the companies or retailers but have not yet received the payment? Are you struggling to recover your payment dues? If yes, you’ve come to the right place. Today, we’ll be discussing the best ways to recover your business dues from anyone, including large PSUs, corporates, and fortune companies.

The famous advocate, Vinay Kumar, stated from his research that about 27% of the MSMEs receive more than half of their payments after three months. While 31% of MSMEs receive 30% to 50% of payments from the buyers after 90 days.

So, it’s significant to know the best strategies to recover dues from annoying buyers. In this article, you’ll discover the following.

  • Impact of pending dues on businesses
  • Best ways to recover payment dues from the buyers
  • Top-notch payment recovery schemes
  • How to apply to them and many more

So, without any further delay, let’s dive in.

Impact of Payment Dues on MSMEs & Small Business Owners

The payment dues from the buyers reduce MSMEs cash flow and lead to working capital complications. Also, it limits the loans and credits from the government. It becomes difficult for the company or business to provide enough salaries or wages for the employees and labourers.

Most business owners mortgage homes and factories to maintain financial stability. While a few business owners are severely prone to mental illness such as stress, depression, etc. If the payment dues aren’t recovered soon, the MSMEs soon decrease their presence in the market due to unproductive work, fewer sales, and profits.

All these factors are the consequences of the payment recovery issues from the buyers. But how do you recover the money from the buyers without filing legal cases legally and spending huge bucks on them? You’ll discover the best solutions in the later sections. Read on.

Best Strategies to Recover Payment Dues from the Buyers

There are a few best ways to recover payment from the buyers. Interestingly, these strategies include neither civil nor criminal proceedings. So, are you curious to know? The modes of payment recoveries are as follows.

  • MSMED Act 2006 – This is one of the most significant Acts that you should know to recover all your payment dues.

Now, let’s discuss these two types of payment recovery methods from the buyers.

MSMED Act

The Indian government has developed several Acts to help MSMEs recover various payment dues from the private companies, PSUs, and individual company owners. MSMED Act is one of the laws to help MSMEs that helps in quick payment recoveries from irritating buyers.

According to this Act, there are numerous ways to take action on the buyers if they aren’t made payment within 45 days. Read all the points mentioned below about significant sections in the MSMED Act to recover all payment dues from small retailers to fortune companies.

  • According to section 15, the buyer has to recover all the payment dues to MSMEs under any circumstances within 45 days of the goods purchases. If the buyer and seller have made an agreement, then at least the buyer has to return the payment as per their agreements.
  • According to section 16, if the buyer has failed to recover the amount, the buyer has to pay the compound interest along with an additional interest rate. Usually, the additional buyers’ interest is 3X more than the bank rates given by the Reserve Bank of India.
  • Section 17 from the MSMED Act says that the buyer has to recover the entire payment and interest.
  • Similarly, section 18 of the Act claims that MSMEs can take strict actions on the buyers through MSEFC(Micro and Small Enterprises Facilitation Council) under the necessary conditions if MSMEs haven’t received it within the agreed dates.
  • Another primary section from the MSMED Act is Section 23, which says that the deduction of interest paid doesn’t come under Income Tax.

These are the few sections that every MSMEs should know to recover all of their payment dues. And next comes the MSME Samadhaan Scheme. This is one of the best ways to recover payments quickly. Let’s discuss MSME Samadhaan Scheme in detail in the following section.