Survey Unveils Concerning Payment Delays Among Indian MSMEs Across Major Business Hubs

Recordent’s Study Highlights the Need for Improved Payment Practices and Credit Management in India’s MSME Sector

Recordent, India’s leading credit and payments reporting platform for B2B transactions, recently conducted a comprehensive survey to explore the payment trends and challenges faced by over 2,800 of its member businesses across the country. The study, which spans two financial years (FY 21-23), offers critical insights into the payment behaviors of Micro, Small, and Medium Enterprises (MSMEs) in eight key business hubs: Mumbai, Ahmedabad, Kolkata, Bengaluru, Chennai, Delhi, Hyderabad, and Pune.

The findings of this survey revealed significant payment delays, particularly in cities like Hyderabad, Kolkata, Chennai, and Pune, where approximately 52% of payments remained overdue for more than 90 days. These delays highlight a major concern for businesses in these regions, as delayed payments can severely impact cash flow and overall financial stability. In stark contrast, Mumbai showcased relatively better payment discipline, with only 29% of transactions falling into the overdue category. Other cities, including Bengaluru, Delhi NCR, and Ahmedabad, reported varying levels of delayed payments, ranging from 42% to 49% beyond the 90-day mark.

In terms of payment collection efficiency, Mumbai and Ahmedabad emerged as leaders, with 36% and 38% of trade receivables collected on time, respectively. However, Chennai, Pune, and Hyderabad demonstrated significantly lower efficiency, with only 18%, 19%, and 22% of payments collected within the expected timeframe. These disparities underscore the differences in repayment practices among Indian cities and point to a pressing need for more effective payment management strategies.

The survey also identified five critical factors influencing the creditworthiness of SMEs:

1. Comprehensive Credit Assessment: Evaluating new customers using GST, ITR, PF filings, financial statements, and credit bureau reports is crucial for understanding their creditworthiness.
2. Effective Communication: Timely communication with the right contacts through reminders, payment ledgers, and statements is essential to ensure prompt payments.
3. Automation of Routine Tasks: Automating reminders, statements, and notices can significantly enhance efficiency and reduce the likelihood of delayed payments.
4. Early Warning Systems: Detecting payment anomalies early allows for timely interventions, minimizing the risk of prolonged payment delays.
5. Periodic Review of Credit Behavior: Regularly reviewing customer credit behavior over 45/90/180 days through sales, receipts, and credit analysis is vital for managing sales and credit exposure effectively.

Winny Patro, CEO and Co-founder of Recordent, emphasized the importance of these findings in understanding the payment dynamics across India’s major business hubs. He highlighted the growing need for transformational tools that streamline collections management, helping businesses navigate the challenges posed by delayed payments. Patro noted that by leveraging modern technology solutions, such as Recordent’s platform, companies can effectively track payments, reduce potential losses, and improve overall financial health.

In a move to further support SMEs, Recordent has announced plans to host over 100 knowledge and networking events, targeting more than 10,000 SMEs across the country. These initiatives, including the launch of SME Meet-ups, aim to empower businesses with industry best practices and essential strategies for addressing late payments and credit risk challenges. The meet-ups will offer a unique opportunity for SMEs to connect with industry experts, network with peers, and acquire valuable insights for sustainable growth.

As the Indian MSME sector continues to grow, the need for improved payment practices and efficient credit management becomes increasingly vital. Recordent’s survey serves as a wake-up call for businesses to adopt more proactive measures in managing their receivables and ensuring timely payments, ultimately contributing to the long-term stability and success of the sector.