Good credit control isn't about chasing payments better — it's about reducing how often you need to chase at all. This checklist covers the practical steps SMEs can put in place before, during, and after extending credit to a B2B client.
Before Extending Credit
- Check the client's basic creditworthiness before agreeing to credit terms — company registration status, time in business, and (where possible) references from other suppliers
- Set a clear credit limit per client, especially for new relationships, and increase it gradually as a payment track record builds
- Put payment terms in writing in every purchase order or service agreement — due date, payment method, and what happens in case of delay (interest, suspension of further supply, etc.)
- Get your own Udyam (MSME) registration if eligible — this unlocks statutory protections like the MSME Samadhaan remedy and mandatory 45-day payment timelines from buyers
- Decide upfront which clients get advance/partial payment terms versus full credit, based on order size and relationship history
During the Relationship
- Invoice promptly — the moment goods are delivered or services completed, not days later. Delayed invoicing directly delays payment.
- Track your accounts receivable aging (0-30, 30-60, 60-90, 90+ days) on a regular schedule, not just when something feels off
- Set automatic reminders for upcoming and overdue due dates rather than relying on manual follow-up
- Review credit limits periodically for repeat clients — both upward (for reliable payers) and downward (the moment payment behavior worsens)
- Watch for early warning signs — repeated excuses, missed promised dates, unresponsiveness — and treat them as triggers to tighten terms, not ignore
When a Payment Is Late
- Follow a consistent, written escalation sequence — reminder, demand letter, legal notice — rather than ad hoc, inconsistent follow-up
- Don't extend further credit to a client with an overdue balance, regardless of relationship history
- Document every communication — every promise, every excuse, every missed date — in case the matter needs to escalate further
- Know your fastest available remedy — MSME Samadhaan if registered, a legal notice otherwise — and use it without excessive delay once reminders fail
Structural Protections Worth Considering
- Trade credit insurance for businesses with concentrated exposure to a few large clients, to cover non-payment risk
- Personal guarantees or security for larger credit lines extended to smaller or newer counterparties
- Interest-on-delay clauses built into your standard terms, so late payment carries an automatic cost rather than relying purely on goodwill
- Diversify your client base where possible — heavy reliance on one or two large buyers magnifies the impact of any single default
Reviewing the System Itself
- Audit your bad debt rate periodically — what percentage of receivables turned into actual losses, and from which type of client
- Identify patterns — are delays concentrated in a particular industry, deal size, or payment term structure? Adjust policy accordingly
- Train whoever handles sales/onboarding to flag credit risk at the deal stage, not just leave it to the finance team after the fact
Final Thoughts
Most credit control failures aren't dramatic — they're the slow accumulation of skipped steps: no written terms, no aging review, no consistent follow-up sequence. Running through this checklist regularly, rather than only after a bad debt happens, is what actually keeps cash flow predictable.