Every invoice that is paid late is a short-term loan from your business to your customer — usually interest-free. For a small business, a few slow payers can be the difference between paying suppliers on time and scrambling for cash.
Collecting money is easier when the work starts before the invoice is sent. This guide covers the whole cycle, from setting terms to following up.
Set Clear Terms Before You Sell on Credit
- Agree payment terms in writing — for example, payment due within 15 or 30 days of the invoice.
- Set a credit limit for each account customer, and check it before you bill more.
- For new or large orders, consider an advance or part-payment upfront.
Invoice Promptly and Accurately
The payment clock only starts when the customer has your invoice. Send it the same day the goods or service are delivered, and make sure it is right first time — a wrong GSTIN, price, or quantity gives a customer a reason to delay. Our guide on what a GST invoice must include covers the details.
Every invoice should show a clear due date and how to pay.
Make Paying Easy
The fewer steps between “I should pay this” and “paid”, the faster you get your money. Put your bank details on the invoice, accept UPI where you can, and consider sending a link the customer can use to pay online.
Know Who Owes What
Review your unpaid invoices at least weekly. A useful way to look at them is by how overdue they are — not yet due, 1–30 days overdue, 31–60, 61–90, and more than 90 days. The older a debt gets, the harder it is to collect, so the oldest invoices deserve the most attention.
To see how quickly you are being paid overall, calculate your average collection period (often called days sales outstanding, or DSO):
Average collection period (DSO)
DSO = (amount receivable ÷ credit sales for the period) × days in the period
Example: (₹4,00,000 ÷ ₹12,00,000) × 90 days = 30 days
If your terms are 15 days and your DSO is 30, customers are taking twice as long as agreed.
A Simple Follow-Up Schedule
- A few days before the due date: a friendly reminder with the invoice number, amount, and payment options.
- On the due date: a short note that payment is due today.
- About a week overdue: a direct follow-up — ask whether there is any problem with the invoice.
- About a month overdue: a phone call to the person who approves payments, and agree a firm date.
- Beyond that: pause further credit, and discuss next steps with an adviser if needed.
Keep every message polite and specific. If the customer disputes part of the invoice, resolve it quickly — issue a credit note for the agreed amount — so the undisputed balance can be paid.
Accept Part-Payments, and Record Them Properly
A customer who can’t pay everything at once may be able to pay in instalments. Accepting part-payments keeps money coming in, as long as each one is recorded against the right invoice and the balance due stays visible.
If You Are a Registered Micro or Small Enterprise
If your business is registered as a micro or small enterprise, the MSMED Act, 2006 gives you specific protection: buyers must pay within the agreed period, which cannot be more than 45 days (or 15 days where no period was agreed), and delayed payments attract compound interest at three times the bank rate notified by the RBI. Delayed-payment complaints can be filed through the government’s MSME Samadhaan portal. Check the current rules, and mention your registration status on your invoices and terms.
Key Takeaways
- Agree terms and credit limits before you sell on credit.
- Invoice the same day, get it right first time, and show a due date and payment options.
- Review unpaid invoices weekly, oldest first, and track your average collection period.
- Follow up on a schedule, resolve disputes with credit notes, and record every part-payment.
How BizPro Helps
BizPro gives each invoice a due date and a status — unpaid, partially paid, or paid — that updates as you record full or part-payments. Your team gets reminders when invoices are about to fall due and when they become overdue, customer credit limits are checked before you bill, and the receivables list shows what each customer owes. You can also share a payment link so customers can pay online through Stripe, Razorpay, or PayPal. See online invoice payments and customer management .