# Accounts Receivable Best Practices: Getting Paid Faster in India

Every unpaid invoice is an interest-free loan you didn't choose to give. Yet most Indian businesses treat collections as an afterthought — invoices go out late, reminders feel awkward, and ageing reports get opened only when cash runs short. Meanwhile, DSO quietly climbs from 45 days to 75, locking up lakhs of working capital.

The businesses that get paid fastest don't collect harder. They design the entire receivables process better. Here's how.

Start Before the Sale: Credit Policy

Set terms deliberately

"Whatever the customer wants" is not a credit policy. Define standard terms (e.g., Net 30), exceptions (Net 45 for anchor clients, 50% advance for new customers), and who can approve deviations. Put it in writing.

Screen customers

Before extending significant credit:

  • Verify the GSTIN — active status tells you the business is compliant and registered.
  • Check trade references and, where available, bureau scores.
  • For large exposures, consider partial advances or bank guarantees.

A two-hour check prevents the six-month recovery nightmare.

Invoice Like It Matters (Because It Does)

Most collection problems begin at invoicing:

  • Same-day invoicing. The clock starts when the customer receives the invoice, not when you raise it. Delay here is pure DSO leakage.
  • GST-perfect invoices. Include correct HSN/SAC codes, place of supply, buyer's GSTIN and your details. Under e-invoicing mandates (applicable to businesses above the prescribed turnover threshold generating IRNs), errors trigger rejections and rework loops.
  • Send through the channel the AP team actually uses. Ask your contact: email, portal upload, or both? Invoices lost in procurement portals are astonishingly common.
  • State consequences clearly: due date, late-payment interest, and — if you're a registered MSME — your rights under the MSMED Act's 45-day rule.

Build a Collection Cadence That Doesn't Feel Awkward

Collections fail when they're ad hoc and emotional. Systematise them:

| Day | Action |

|---|---|

| Due date −3 | Friendly reminder: "Just confirming this is scheduled for payment on Friday." |

| Due date | Confirmation of dispatch/processing |

| +7 | Polite follow-up with invoice copy attached |

| +15 | Call the AP contact; identify any dispute |

| +30 | Escalate to the economic buyer; mention interest clause |

| +60 | Formal demand letter; evaluate legal/MSME Samadhaan routes |

Two principles make this work:

  1. Separate selling from collecting. Your account manager closes deals; a dedicated collector chases payments. Salespeople won't pressure customers they need to upsell.
  2. Disputes die young. Most late payments trace to disputes — pricing mismatches, PO issues, GRN pending. Resolve them in days, not quarters, with a weekly internal dispute review.

    3. Measure What You Want to Change

    Track these monthly:

    • DSO — overall and by customer segment.
    • Collection effectiveness index (CEI) — collections ÷ collectible receivables.
    • % overdue — share of receivables past due date.
    • Ageing buckets — 0–30, 31–60, 61–90, 90+.

    Publish them. When DSO appears on the leadership dashboard next to revenue, behaviour changes.

    Automate the Machinery

    Modern AR tooling handles reminders, reconciliation and payment links automatically, freeing humans for genuine disputes. At minimum: templated reminder sequences, a shared collections tracker, and UPI/NEFT/RTGS details printed on every invoice to remove payment friction.

    Structural Fixes for Structural Problems

    Sometimes the payment structure is the problem, not the process. Annual contracts demanding full upfront payment create predictable friction: the buyer's finance team stalls, negotiates instalments informally, or delays indefinitely. Rather than fighting this every quarter, change the structure.

    This is exactly what vendor financing platforms address. With KredFlow, a buyer can convert an annual contract into monthly payments while the vendor still receives the full amount upfront — the AR disappears from your books on day one, and the buyer gets budget-friendly instalments. Instant GSTIN-based approval means setup takes minutes, not weeks.

    Handle Chronic Late-Payers Decisively

    For repeat offenders:

    • Move them to advance or COD terms — calmly, factually, citing policy.
    • Apply contractual interest consistently; waived interest trains bad behaviour.
    • If you're an MSME supplier, use MSME Samadhaan for payments delayed beyond 45 days — the compound interest provision has real teeth.
    • Weigh the true profitability of the account: a high-maintenance, slow-paying customer at low margins is often not worth keeping.

    Quick-Win Checklist

    1. Invoice within 24 hours of delivery — starting Monday.
    2. Add UPI and bank details to every invoice template.
    3. Set automated reminders at −3, +7 and +15 days.
    4. Run a weekly 20-minute disputes standup.
    5. Put DSO on the monthly leadership dashboard.
    6. Re-terms your three worst-paying accounts this quarter.

      7. Do these six things and most businesses cut DSO by 10–20 days within two quarters. On ₹10 crore of annual revenue, that's ₹30–55 lakh of cash unlocked — without a single new sale.