MSME Samadhaan: Government’s Initiative to Help Resolve Delayed Payments for Small Businesses or MSME owners
Historically in India, micro, small, and medium enterprises (MSMEs) have often faced the challenge of delayed payments, which severely hampers their operations by restricting cash flow and, in many cases, leading to closure.
To address this issue, Finance Minister Nirmala Sitharaman in the Union Budget 2023 announced that starting from 1 April 2024, the government will allow expense deduction on income tax claims for buyers only when they actually make payments to their suppliers, particularly the MSMEs.
The announcement also stated that MSMEs should receive payments within 45 days if there is a formal agreement, or within 15 days in the absence of an agreement. Although the 45-day payment rule has been in place since the MSMED Act of 2006, its enforcement has been largely ineffective.
The government has been cognizant of the issues faced by MSMEs – the growth engines of Indian economy – led by delayed payments. To tackle the same, the government has taken several steps, including the establishment of the MSME Samadhaan portal in 2017 to address this issue and ensure timely payments for micro, small, and medium-level businesses.
If your business is facing delayed payments, learn how this government initiative can help Indian MSMEs deal with the issue of delayed payments by taking action with the MSME Samadhaan portal.
With the MSME Samadhaan portal, the government aims to provide a solution for MSMEs struggling with delayed payments, which can impact their cash flow and business operations.
In 2023 alone, about 30,000 MSMEs filed complaints for delayed payments amounting to over ₹7,000 crore. This highlights the importance of resolving this issue for the growth of the MSME sector.
As a key contributor to India's GDP, the MSME sector plays a crucial role in the economy. Financing and payments have long been challenges for MSMEs, especially during the pandemic. The MSME Samadhaan portal offers a solution to help MSMEs navigate these challenges.
Discover how the MSME Samadhaan portal can benefit your small business and streamline your payment process. Take advantage of this government initiative to tackle delayed payments and support the growth of your MSME.
What is MSME Samadhaan and how it helps small businesses?
MSME Samadhaan is a government of India initiative aimed at resolving delayed payments and disputes for MSMEs, SMEs, and small businesses. Through the MSEFC or the Micro and Small Enterprise Facilitation Council portal, distressed MSMEs can lodge complaints against buyers to seek resolution. This initiative is designed to provide transparency and accountability in payment processes for small businesses.
Who is eligible for MSME Samadhan?
Any small business or MSME registered under Udyam and experiencing issues like delayed payments or payment disputes with clients is eligible to file a complaint through the platform. Additionally, businesses can also report payment delays from Public Sector Undertakings (PSUs) or government agencies if payments are not received within 45 days.
How to file a complaint on MSME Samadhan?
• To raise a complaint on MSME Samadhan, small business owners can visit the MSME Samadhaan portal and click on Case Filing for MSME Entrepreneur/MSE Units.
• Select the type of validation of MSME Registration using either Udyog Aadhar Number or Udyam Registration Number.
• Enter the Udyam Registration number or Udyog Aadhar Number and provide the mobile number linked to the Udyam Registration number.
• Enter the verification code displayed and click on Validate Udyam Registration to receive a one-time password (OTP) on the registered email address.
• Fill and submit the complaint application form, providing necessary details such as work order, invoice, etc. Up to five attachments can be included.
• Once the complaint is filed, an acknowledgment will be sent to the registered email address along with the contact details of the concerned MSEFC.
Alternatively, business owners can also file a physical complaint by visiting the office of the concerned MSEFC.
Also Read: The Roadmap to Success: A Guide to Leveraging Government Schemes for MSMEs
What are the documents required to file a case on MSME Samadhaan?
• Purchase order from the customer
• Shipping receipt or Delivery Challan
• Invoices related to the transaction
Ensure you have your Udyam Registration or Udyog Aadhar number ready for the process.
How to track complaint status on MSME Samadhaan?
• Access the MSME Samadhaan portal
• Sign in using your Udyog Aadhar or Udyam Registration number
• Navigate to the dashboard to view your complaint status
Please Note: There is a common misconception regarding Udyam registration, MSME registration, and Udyog Aadhar. It is important to note that Udyam registration is the sole portal that MSMEs must register on to be officially recognized as micro, small, and medium enterprises in India.
What happens after a complaint is filed on MSME Samadhaan?
After submitting a complaint, it is reviewed by the MSME Facilitation Council (MSEFC) which investigates and validates the issue. Subsequently, the council issues a payment order to the buyer to settle the outstanding amount plus interest. If no action is taken, contact the relevant MSEFC using the contact details provided in the acknowledgment of your complaint submission. This process ensures protection for MSMEs in resolving disputes efficiently.
How to address the issue of delayed payments as an MSME?
Dealing with delayed payments can be a common challenge for small businesses. When faced with this issue, it is important to carefully consider your options before taking action. While complaining about the buyer may be necessary in some cases, it is also important to weigh the potential consequences, such as damaging the relationship with the buyer and potentially losing future business.
As a small business owner, it is vital to prioritize timely payments for the continuity of your operations. To tackle the problem of delayed payments effectively, consider implementing strategies such as setting clear payment terms, sending timely reminders, and offering incentives for early payments. Additionally, establishing a solid contract with clear payment terms can help protect your business in case of payment disputes.
Remember, every situation is unique, so it is important to assess each case individually and make the best decision for your business. By staying proactive and implementing effective payment management strategies, you can help mitigate the impact of delayed payments on your small business.
Here are some essential tips to ensure prompt payments and combat delayed payments for MSMEs:
Draft a comprehensive work order contract: Specify delivery timelines, credit periods, payment terms, etc., in the work order to facilitate timely payments. Implement payment in installments instead of bulk payments for a consistent cash flow.
Issue invoices promptly: Generate invoices upon order completion and set clear payment deadlines as per the work order. Remind customers as the due date approaches and consider incorporating late payment penalties or provisions for partial payments.
Explore alternative solutions: If customers persistently delay payments, seek recourse through MSME Samadhaan or consider taking out an MSME business loan like invoice financing, collateral-free Business Loan, or a secured Business Loan Against Property. This loan allows you to borrow against approved invoices at a discount, supporting your operational continuity and business expansion.
In conclusion, there are numerous strategies to address payment delays, and it's vital to assess your circumstances to determine the most suitable approach for your enterprise.
Godrej Nirmaan – Beyond Lending
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To apply for a Godrej Business Loan for MSMEs or Udyog Loan Against Property, click here.
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