Key points
- Receivable days (DSO) = debtors ÷ credit sales × 365. Measure it monthly, per party and for the firm.
- Give every party a credit limit (₹) and a credit period (days). Hold new bills when either is crossed, unless the owner approves.
- GST 180-day rule: a buyer who has not paid the value plus tax within 180 days of the invoice must pay back the ITC with interest (section 16(2), second proviso).[1]
- MSME 45-day rule: if you are a registered micro or small enterprise, buyers must pay within the agreed period, at most 45 days from acceptance, or owe compound interest at three times the RBI bank rate.[2]
- Remind before the due date, not only after. A polite note three days early is the cheapest collection there is.
Measure first: your DSO
Take total outstanding from parties on the last day of the month, divide by credit sales of the last 12 months, and multiply by 365. Do it for the whole firm and for each of your top 20 parties. The party list matters more: a firm-level DSO of 55 days often hides five parties at 120 days.
| Measure | How to calculate | Watch for |
|---|---|---|
| DSO (firm) | Debtors ÷ 12-month credit sales × 365 | A rise of 5+ days in a quarter |
| DSO (party) | Party's outstanding ÷ party's 12-month sales × 365 | Parties above twice their credit period |
| Overdue % | Overdue amount ÷ total outstanding | Above 25% means reminders are late or ignored |
| Ageing buckets | 0–30, 31–60, 61–90, 90+ days past bill date | Anything moving into 90+ |
Set limits that people follow
- Write it down. For each party: credit period (for example 21 or 30 days) and credit limit in rupees. Share it with the party in the price list or the first bill.
- Base it on behaviour. Start new parties low. Raise limits only for parties who pay on time for three months.
- Grade parties. For example A (pays early), B (on time), C (up to 15 days late), D (up to 45 days late), E (beyond). Grades make the rule simple for billing staff.
- Hold at the counter. When a bill would take a party over its limit, or it has a bill past the period, the bill needs the owner's approval. A rule that the billing operator can't see is not a rule.
- Review monthly. Move grades up or down based on last month's payments, not on how big the party is.
A reminder calendar
| When | Message | Who |
|---|---|---|
| 3 days before due | Polite: amount, bill number, due date, UPI link | Automatic |
| On the due date | Firm: amount is due today, link to pay | Automatic |
| 7 days overdue | Firm, with the ledger statement attached | Automatic + accountant call |
| 15 days overdue | Call from the owner or salesman | Owner |
| 30 days overdue | Final: new credit on hold until paid | Automatic + owner |
Ready-to-send text in five languages is in our WhatsApp payment reminder templates. Business messages on WhatsApp must use approved templates, so use reminders that state the bill and the amount, not offers.
Two rules your buyers already have to follow
The GST 180-day rule
Under the second proviso to section 16(2) of the CGST Act, if a buyer does not pay the supplier the value of supply plus tax within 180 days from the invoice date, the buyer must pay an amount equal to the ITC it claimed, with interest; it can take the credit again once it pays.[1] Rule 37 of the CGST Rules sets out how.[3] Most GST-registered buyers know this, so a reminder at around 150 days that mentions the bill date is reasonable and factual. Keep it factual: it is the buyer's obligation, and the buyer's CA decides how it applies.
The MSME 45-day rule
Under the MSMED Act 2006, a buyer from a micro or small enterprise must pay on or before the agreed date, which cannot be more than 45 days from accepting the goods. If it doesn't, it owes compound interest with monthly rests at three times the bank rate notified by the RBI.[2] The supplier can take the case to the state's MSE Facilitation Council.[2] This protects you only if you are a registered micro or small enterprise; if you are, put your registration number on your bills.
Worked example, in rupees
Om Sai Distributors, Nashik (sample firm) had credit sales of ₹12,00,00,000 over the last 12 months and ₹1,80,00,000 outstanding on 30 September 2026.
| Today | Target | |
|---|---|---|
| DSO | ₹1,80,00,000 ÷ ₹12,00,00,000 × 365 = 54.8 days | 40 days |
| Outstanding at that DSO | ₹1,80,00,000 | ₹12,00,00,000 × 40 ÷ 365 = ₹1,31,50,685 |
| Cash released | ₹48,49,315 | |
| Yearly interest saved at your cash-credit rate, say 11% | about ₹5,33,000 |
Om Sai sets credit periods of 30 days for A and B parties and 15 days for C, holds bills for D and E parties above their limit, and moves reminders to three days before the due date. The 11% is only an example: use your own bank rate to see what each day of udhaar costs you.
A weekly routine
- Print the ageing list: who moved into 31–60 and 61–90 this week.
- Check bills due in the next 7 days are covered by automatic reminders.
- Call every party in 61–90 days; agree a date and note it.
- Approve or refuse held bills for parties over the limit.
- Update grades monthly; tell salesmen which parties are on hold.
How Moharbill helps
- Credit score A to E for each party, from how it actually pays, with a warning before billing a party over its limit or with overdue bills.
- WhatsApp reminders in each party's language on your calendar, with a UPI link for the exact amount. See collections.
- Payment links from supported gateways are matched to the bill automatically; matching UPI payments to your own UPI ID arrives in v1.1.
- A retailer portal where parties see their ledger and pay; see promotions and retailer portal.
- Built for distributors and wholesalers.
Frequently asked questions
How do I calculate receivable days (DSO)?
Divide total debtors on a date by credit sales of the last 12 months and multiply by 365. Calculate it for the firm and for each large party.
What is a good DSO for a distributor?
It depends on the trade and the credit periods you offer. Compare DSO with your own credit terms: if you give 30 days and DSO is 55, parties are paying about 25 days late on average.
What is the 180-day rule in GST?
Under the second proviso to section 16(2) of the CGST Act, a buyer that does not pay the supplier the value plus tax within 180 days of the invoice must pay back the input tax credit it claimed, with interest, and can re-claim it after paying.
Does the MSME 45-day rule apply to my sales?
It protects suppliers that are micro or small enterprises under the MSMED Act. Buyers must pay within the agreed period, which cannot exceed 45 days from acceptance, or owe compound interest at three times the RBI bank rate.
When should I send a payment reminder?
Start three days before the due date, then on the due date, 7 days after and 30 days after. Early, polite reminders get paid faster than late, angry ones.
Sources
All read on 17 Oct 2026.
- CGST Act 2017, section 16(2), second and third provisos (180 days), CBIC. taxinformation.cbic.gov.in
- Office of the DC (MSME), "Delayed Payments to Micro and Small Enterprises under the MSMED Act, 2006" (45 days, compound interest at three times the bank rate, MSEFC). dcmsme.gov.in
- CGST Rules 2017, rule 37 (reversal for non-payment within 180 days), CBIC. taxinformation.cbic.gov.in
Moharbill टीम ने लिखा
हम Hexa Secure Labs में डिस्ट्रीब्यूटर के लिए GST बिलिंग बनाते हैं और ये गाइड उन्हीं नियमों से लिखते हैं जो हम प्रोडक्ट में डालते हैं। कुछ पुराना दिखा? हमें बताएँ, हम दो कामकाजी दिनों में ठीक कर देंगे।