Budget 2023: Small Businesses' Hopes and Delayed Payment Issue​

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Budget 2023 Small Businesses' Hopes and Delayed
Payment Issue

• By - CreditQ

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Introduction

• In the forthcoming budget announcement for 2023,
  Nirmala Sitharaman, India's finance minister,
  holds the opportunity to shape the economic
  landscape. Small businesses are keenly awaiting
  the budget's provisions, with a primary concern
  being the prevailing issue of delayed payments.

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Challenge Delayed Payments for MSMEs

• Micro, Small, and Medium Enterprises (MSMEs)
  encounter a significant challenge in the form of
  delayed payments. This issue adversely impacts
  their cash flow, leading to disruptions in their
  operations. Unpaid invoices and bad debts pose a
  substantial threat to the financial stability of
  these businesses.

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Laghu Udyog Bharti's Initiative for On-Time
Payments

• Collective Action
• Recognizing the urgency of addressing this
  challenge, the Laghu Udyog Bharti, a
  representative group of micro and small
  businesses, has taken a proactive stance. The
  group proposes the imposition of stringent
  penalties on payment defaulters, incentivizing
  them to prioritize timely payments.
• Government's Role
• Creditor companies and sellers are urging the
  government to support the imposition of
  substantial financial penalties. This step aims
  to compel buyers and debtors to fulfill their
  financial obligations promptly, thereby nurturing
  a culture of punctual payments.

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Government's Interventions and Options 

• Retaliatory Measures 
• The government possesses an array of retaliatory
  measures to counter late payments. These measures
  include potential penalties and other regulatory
  actions to ensure compliance with payment
  schedules.
• Delayed Payment Application 
• MSMEs are provided with an avenue to address
  delayed payments through a designated council.
  This council offers guidance to customers on
  settling debts and handling compound interest,
  fostering an environment of effective debt
  resolution.

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Innovative Approaches to Mitigate Cash Flow Issues

• Focus on Credit Management
• Credit management companies are actively
  developing innovative strategies to alleviate
  cash flow challenges faced by MSMEs. Several
  methods are being employed to achieve this goal
• Integration of Technology
• Employing advanced software for accurate data
  collection, evaluation of financial situations,
  and determination of optimal credit limits based
  on credit scores.

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• Digital Credit Application 
• Transitioning to digital credit application forms
  for streamlined client onboarding,
  including essential business information and
  credit extension requirements.
• Enhanced Payment Gateways 
• Integrating user-friendly digital payment
  gateways that encourage timely debt repayment
  and facilitate tracking of prompt payers.
• Automated Monitoring 
• Utilizing automated systems to monitor credit
  behavior, customer whereabouts, and
  financial activities, thereby deterring evasion
  of loan repayment.

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Strengthening MSMEs through Credit Management
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Benefits of Credit Management Tools

• Credit management tools empower MSMEs by
  establishing robust credit application policies
  and enhancing decision-making through
• Payment History Analysis Providing insights into
  customer payment history and behavior.
• Contractual Clarity Ensuring clear inclusion of
  payment terms and agreements in contracts.
• Financial Health Assurance Maintaining a
  favorable cash flow balance to safeguard the
  company's financial stability.

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• Late Payment Reduction Implementing stringent
  credit application policies to mitigate delayed
  payments.
• Efficient Debt Recovery Employing reminders and
  personalized messages to streamline debt
  recovery.
• Customer Performance Analysis Analyzing customer
  performance and payment trends to inform credit
  decisions.

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Conclusion

• With its commitment to enhancing cash flow and
  safeguarding against bad debts, CreditQ stands as
  a prominent credit management firm, offering
  modern and effective solutions for business
  credit management to navigate the intricacies of
  credit management in the ever-evolving economic
  landscape. As the budget for 2023 is anticipated,
  small businesses await proactive measures that
  will address delayed payments and propel their
  growth.