Buyer not paying? What a small business can do
Start with a written reminder listing the invoice, amount and due date, then a formal demand with a deadline. If you are a micro or small enterprise registered on Udyam, the MSMED Act says the buyer must pay within the agreed period and never later than 45 days after accepting the goods or services, and you can file a delayed-payment case on the government’s MSME Samadhaan portal. For larger amounts, a lawyer’s legal notice and then a civil case (or a Section 138 complaint if their cheque bounced) are the next steps.
Step by step
- Send a written reminder. Attach the invoice and delivery proof. Say the amount, the due date and how to pay. WhatsApp or email is fine; keep a copy.
- Call, then confirm in writing. If they promise a date on the phone, send a message the same day: “As discussed, you will pay ₹… by …”. A written promise matters later.
- Send a formal demand. A short letter on your letterhead with the invoice list, total due and a clear deadline (for example 7 days).
- Use MSME Samadhaan if you are a micro or small enterprise with Udyam registration (see below).
- Legal notice. A lawyer’s notice often gets a reply when reminders don’t. It is also the usual step before going to court.
- Court or arbitration. A civil recovery suit, or arbitration if your agreement says so. If they paid by cheque and it bounced, see cheque bounce steps.
- Keep a fair record. On REFFNET you can file a dispute with the facts and your proof. The business sees it and can reply publicly, and other suppliers can know before they trust. Stick to facts you can prove.
The MSME 45-day rule and MSME Samadhaan
- Who it helps: micro and small enterprises registered on Udyam, selling to any buyer in India.
- The rule: under Section 15 of the MSMED Act, the buyer must pay by the agreed date, which can’t be more than 45 days from accepting the goods or services. With no written agreement, the limit is 15 days.
- Interest: if they pay late, Section 16 lets you claim compound interest with monthly rests at three times the bank rate notified by the RBI.
- How to claim: file on the MSME Samadhaan portal (samadhaan.msme.gov.in). The case goes to your state’s Micro and Small Enterprises Facilitation Council, which tries conciliation first and then arbitration.
- Why buyers care: since the 2024–25 assessment year, Section 43B(h) of the Income-tax Act lets a buyer deduct a payment owed to a micro or small enterprise only in the year it is actually paid, if paid after the MSMED time limit. Mentioning this politely often speeds up payment.
Rules as of October 2026. Ask your CA or lawyer how they apply to your case.
Stop it happening next time
- Agree payment terms in writing on the purchase order or quotation.
- Set a credit limit per buyer and take part advance from new buyers.
- Check the buyer first: GST status and filing record and what other businesses say.
- Watch your regular buyers in the REFFNET app: you get an alert if they stop filing GST returns or get new disputes.
Questions people ask
Can I charge interest on a late payment?
If you are a micro or small enterprise registered on Udyam, the MSMED Act gives you compound interest at three times the RBI bank rate after the due date. Otherwise, interest depends on what your invoice or agreement says.
Do I need Udyam registration to use MSME Samadhaan?
Yes. The portal is for micro and small enterprises with Udyam registration, and the case is about payments from buyers anywhere in India.
Is it safe to post a dispute about a buyer on REFFNET?
Write only facts you can prove (invoice, delivery, messages) and attach the proof. The buyer is notified and can publish a reply. Don’t add insults or guesses.