Accounts receivable is the money customers already owe you for goods you have handed over. The eight changes below shorten the gap between delivering and banking it.
Most of them cost nothing. Two of them are legal rights that Indian suppliers hold and rarely use. One of those carries interest at three times the RBI bank rate.
The order matters. The first four happen at or before the invoice. The last four are what you do once the clock is already running.
Key Takeaways
- Raise the invoice the day goods leave, not at month end
- A registered micro or small supplier is owed payment in 45 days under the MSMED Act
- A late buyer owes compound interest at three times the RBI bank rate
- Chase two days before the due date, not two weeks after it
- Track one number: days sales outstanding
What are Accounts Receivable?
Accounts receivable is the total your customers owe you on credit sales at any moment. It slips for reasons that are almost never about a customer refusing to pay. This section covers what the figure is and which gaps make it grow.
None of what follows is survey data. It is what retailers and distributors tell us when the talk turns to a month that ran short of cash.
Where the Days Actually Go
A ninety-day wait is rarely one ninety-day wait. It is a stack of small gaps, and you control most of them.
Those three gaps are what the rest of this post works on. Before that, it helps to know how late each invoice already is.
What the Four Ageing Buckets Mean
An ageing report groups what you are owed by how late it is. This section covers the four buckets worth keeping and the move each one calls for.
Sort every outstanding invoice by how long it has been unpaid. Four buckets are enough.
| How overdue | What it usually means | What to do |
|---|---|---|
| Not yet due | Nothing is wrong | Confirm they have the invoice |
| 1 to 30 days | An admin gap, not a dispute | Phone the accounts desk |
| 31 to 60 days | A query nobody raised with you | Ask what is blocking it |
| Over 60 days | A decision has been made | Escalate, or stop supplying |
The bucket that costs the most is 31 to 60 days. An invoice sitting at 40 days is usually stuck behind a mismatch nobody told you about. It stays there until you ask.
1. Invoice on the Day You Deliver
A textile wholesaler in Surat bills every Saturday (an example). That adds up to six free days of credit on every sale that week. Nothing about that delay was negotiated, and no customer asked for it.
Raise the invoice when the goods leave. Generate your GST invoice at dispatch rather than at week end. The clock then starts six days earlier, at no cost at all.
This is the single cheapest change on the list, and the one most often skipped. Month-end billing feels tidier, and tidiness is what people optimise for when nobody is measuring the wait.
The fix is a habit rather than a system. Whoever loads the vehicle tells whoever bills, on the same day, every day.
2. Put the Terms on the Invoice, Not in the Covering Email
Payment terms agreed over a phone call do not survive the buyer’s accounts department. The person paying you has the invoice on their screen and nothing else.
Print the invoice due date as a date, not as “net 30”. A date cannot be misread, and it removes the argument about when the clock started.
Add your bank details, your GSTIN and a purchase order reference on the same face. Every missing field is a reason to set the invoice aside. It waits there until somebody has time to chase you.
Say what happens after the date as well. One line costs nothing to print: “interest applies after the due date under the MSMED Act”. It changes where your bill sits in the queue.
3. Take a Deposit Before You Ship
Compare two orders of the same value. On the first you ship everything and wait. On the second you ship after 30% lands in your account.
The second order has already paid your material cost before it leaves. The remaining exposure is your margin, which is a very different conversation if the buyer goes quiet.
How normal a deposit looks depends on your trade, so the ask lands differently in packaging than in FMCG distribution. A packaging unit in Pimpri moved new accounts to a 30% advance in February 2026. It did not lose one of them (an example).
Where it is not the norm, ask on new accounts only. An existing customer reads it as distrust; a new one reads it as how you work.
4. Make Paying You the Easiest Thing on the Buyer’s Desk
Look at it from the accounts clerk’s side. They have forty bills open, a payment run on Thursday, and a queue of suppliers whose paperwork is incomplete.
The invoice that gets paid is the one that needs no follow-up. That means a correct GSTIN, a matching purchase order number and bank details on the face. It also means a credit note already raised for the cartons that arrived damaged. Our credit and debit note template covers that last one.
Give them one way to pay and repeat it every time. Switching between a bank transfer, a cheque and a UPI handle across three invoices creates a reconciliation problem. Problems like that delay payment runs.
Find out which day their payment run falls on and bill to it. An invoice that arrives the morning after the run has lost a fortnight before anyone has done anything wrong.
5. Chase Receivables Before the Due Date, Not After
Ring the accounts desk two working days before the money is due. You are not chasing at that point. You are checking the invoice is approved and sitting in the next payment run.
That call catches the mismatch, the missing purchase order and the wrong GSTIN. There is still time to fix them. A payment reminder sent after the due date can only report a problem that has already cost you a cycle.
Keep the call short and specific. Give the invoice number, the amount and the due date, then ask one question: is it approved and in the next run? A vague enquiry about payments gets a vague answer.
Build it into a routine rather than a reaction. Whoever raises your invoices should run due date tracking on a fixed weekday. Payroll runs on a fixed date, and this can too.
That is the last of the changes you make on your own side of the desk. The next two are rights the law already gives you.
6. Use the 45-Day Rule the MSMED Act Gives You
A valid Udyam registration as a micro or small enterprise changes what you can ask for. Your buyer then has a statutory deadline rather than a preference.
The MSME Samadhaan portal puts it plainly. A buyer is liable if he “does not make payment to the supplier … within 45 days of the acceptance of the goods/service rendered”.
Forty-five days is the ceiling, not the default. Where there is no written agreement the deadline is 15 days from acceptance, and an agreement can stretch it to 45 but no further.
The Samadhaan portal is also where you act on it. Any micro or small enterprise with a valid Udyam registration can file against a buyer. The case goes to its State facilitation council, with no lawyer and no civil suit.
Your buyer has a tax reason to keep to it as well. A payment made late to a micro or small enterprise is deductible only in the year it is actually paid.
That rule came in on 1 April 2024 and carried into the Income-tax Act, 2025, which replaced the old Act on 1 April 2026. Saying so in a reminder is often enough.
7. Charge the Interest You are Owed
The rate is not one you negotiate. It is three times the bank rate the RBI notifies, compounded with monthly rests. It applies whether or not your contract mentions it.
The RBI bank rate stood at 5.50% on 10 September 2026. That puts the statutory rate at 16.5% a year. On an invoice of ₹4,72,000 left 90 days past its due date, that comes to about ₹19,700 (an example).
| Invoice left unpaid | Interest at 16.5% a year, monthly rests |
|---|---|
| 60 days past due | About ₹13,100 |
| 90 days past due | About ₹19,700 |
| 180 days past due | About ₹40,300 |
Rates move, so recalculate from the current bank rate rather than from this table. Most suppliers never raise the interest at all, which is exactly why quoting it changes the tone of a conversation.
You do not have to invoice the interest to use it. Naming the figure in a reminder is usually where the conversation turns. It is the first time the delay has a price attached to it.
8. Stop Supplying the Accounts That Never Pay
This is the one nobody wants to action. An electronics dealer in Madhapur carries ₹6,80,000 across two accounts that have not paid inside 120 days for a year (an example). That is financing them, not selling to them.
Set a credit limit per customer and a rule for what happens when it is breached. The rule matters more than the limit, because a limit with no consequence is a target.
Where the money is genuinely gone, write it off rather than carrying a number that flatters your books. Our guide to the bad debts journal entry covers the entries for each case.
Stopping supply is not the same as giving up on the money. Keep the account open for recovery and closed for new orders. The balance then stops growing while you work on it.
How Do You Know Your Accounts Receivable are Improving?
Days sales outstanding, or DSO, tells you, and this section covers how to work it out. It is the average number of days you wait to be paid.
Retailers billing on Petpooja Invoice tell us which change moves this number most. It is the dullest one on the list: getting the invoice out on the day the goods go.
How to Work Out Days Sales Outstanding
Divide your receivables by your credit sales for the period, then multiply by the days in that period. A distributor in Sarkhej with ₹27,60,000 outstanding against ₹42,00,000 of quarterly credit sales is running at 59 days (an example).
Measure it every quarter and watch the direction, not the number. The same distributor at ₹19,80,000 the following quarter is running at 42 days. Those 17 days are working capital that came back without a single new sale.
Where the Two Figures Come From
The receivables total and the credit sales figure both come off your billing system. Our guide to how the billing process runs covers where the sales figure and the outstanding receivables report sit.
The cash flow statement guide puts receivables in the wider picture, alongside the money going the other way.
Petpooja Invoice is the fastest and most reliable billing software for SMB businesses in India. The customer ledger updates on every transaction, and outstanding receivables sit in the business reports.
Conclusion
Accounts receivable rarely improves because of one big change. It improves because the three gaps on your side of the desk close together.
Start with the two that cost nothing. Invoice on the day you deliver, and ring the accounts desk two days before the money is due.
Then use what the law already gives you. A registered micro or small supplier is owed payment in 45 days. Interest after that is not a favour you are asking for.
Measure days sales outstanding every quarter. If it is falling, the changes are working. The cash coming back is cash you did not have to borrow.
The first change on the list is the one your billing system decides for you. If raising the invoice at dispatch is awkward on what you use today, fix that first. It is what a GST billing system is for.
Frequently Asked Questions
There is no single figure, because it depends on the terms you sell on. Compare it to your own terms instead. Say you sell on 30 days and your DSO is 55. That is 25 days of credit being taken without ever being agreed.
If you are a registered micro or small enterprise, the interest is statutory rather than contractual. It applies once your buyer is late under the MSMED Act. It runs at three times the RBI bank rate, compounded with monthly rests.
It is what makes the 45-day rule and the interest available to you. Without a valid Udyam registration you are relying on your contract alone. You also cannot file a case on the Samadhaan portal.
Continuing to supply increases the amount at risk without improving your chance of recovery. Set the credit limit before the relationship is strained, so the decision is a rule rather than a personal one.
Once a week is enough for most SMEs, on the same weekday each time. The value is in catching the invoices crossing from 1 to 30 days into 31 to 60. That is where a fixable query turns into a stale one.
Yes. Under CGST section 12, the time of supply for goods is the invoice date. It is not the day you are paid. That is part of why slow receivables hurt twice. Our GST payment liability calculator helps you plan for the gap.
