Indian cities report 52% of B2B Payments overdue for 90+ days

By Gloria Methri

Recordent’s latest report has uncovered a troubling trend in B2B payments across India’s major business hubs. The data, drawn from a comprehensive survey of over 2,800 member businesses, reveals that nearly 52% of B2B payments in Hyderabad, Kolkata, Chennai, and Pune have been overdue for more than 90 days. This figure paints a dire picture of the financial strain faced by many MSMEs in these cities.

Contrastingly, Mumbai shows a relatively more favourable payment behaviour, with only 29% of payments overdue beyond 90 days. Meanwhile, Bengaluru, Delhi NCR, and Ahmedabad reveal varying levels of delay, with overdue payments ranging from 42% to 49%. This variation highlights a disparity in repayment efficiency among Indian cities, underscoring the urgent need for improved payment practices.

The report further reveals the extent of timely payments collected: Mumbai and Ahmedabad lead with 36% and 38% of trade receivables collected on time, while Chennai, Pune, and Hyderabad fall significantly behind, with figures as low as 18%, 19%, and 22%, respectively. This disparity not only reflects the inefficiencies in payment collections but also emphasizes the broader financial instability impacting MSMEs in these regions.

In response to the financial difficulties faced by many MSMEs, Finance Minister Nirmala Sitharaman announced a new initiative during her full budget speech in July. The plan involves providing credit support through a government-backed guarantee fund aimed at helping stressed MSME loan accounts. This initiative is designed to support businesses in distress and prevent them from slipping into non-performing asset (NPA) categories, thus ensuring their continued operation.

Despite these efforts, data shows that the gross non-performing assets (GNPAs) in MSME loans dropped to Rs 1.31 lakh crore in FY23 from Rs 1.54 lakh crore in FY22. This represents the lowest level of GNPAs in the past five years, following a peak of Rs 1.83 lakh crore in FY20. This decline indicates progress, yet the significant delays in payments highlighted by Recordent’s report suggest that ongoing challenges remain for many MSMEs.

Commenting on the report, Winny Patro, CEO and Co-founder of Recordent, said, “This survey provides valuable insights into the payment dynamics across major Indian cities, underscoring the challenges faced by MSMEs and SMEs. Businesses are increasingly looking for transformational tools that can streamline collections management, helping to overcome these challenges. By leveraging modern technology solutions like ours, we can effectively track payments and mitigate potential losses for companies.”

An in-depth analysis of SME payment behaviour reveals five key factors influencing creditworthiness. Comprehensive credit assessment of new customers utilizing GST, ITR, PF filings, financial statements, and credit bureau reports is critical. Effective communication via timely reminders, payment ledgers, and statements to the right contacts is essential.

Automating routine tasks like reminders, statements, and notices significantly enhances efficiency. Early warning systems that detect payment anomalies are crucial for timely interventions. Lastly, periodic review of customer credit behaviour over 45, 90, or 180 days through sales, receipts, and credit information analysis is vital for effective sales and credit exposure management.