Considerable delay in settlement of dues/payment of bills by large scale buyers to MSMEs adversely affect the recycling of funds and business operations of MSMEs around the world. The consequences of delayed payments are severe to the economic health of these enterprises and cause serious working capital shortages and liquidity problems from them. In the worst cases, late payment can lead to insolvency and bankruptcy. Against this backdrop, CII organized an MSME Policy Roundtable Session on Delayed Payments on 28 January, 2014 at New Delhi.
The document specifically focuses on the issues related to Delayed Payments faced by MSMEs in India with suggestions, solutions and thought provoking ideas which could deal with the effects of it. It also elaborates on the issue of delayed payments and discusses various government initiatives in place for countering this problem. Also included are global impact assessment studies for understanding the impact of delayed payments on SMEs in other economies and some of the measures adopted by them to solve it.
The document contains some suggestions to the government and the industry to tackle this problem effectively. The most relevant ones include:
- Strict implementation of the MSMED Act, 2006
- Introduction of the XBRL system of reporting
- Incentivizing timely payments
- Strengthening the system of factoring for bill discounting
- Disclosure of amounts of delayed payments in company accounts
- Greater role of Micro and Small Enterprise Facilitation Council