Accounts Payable & Receivable Outsourcing
With accounts payable and receivable outsourcing, your bills and collections run as one monthly routine. Payments to micro and small suppliers stay inside the 45-day limit of the MSMED Act, and GST input credit stays safe from the 180-day reversal rule.
What it is
Accounts payable is what you owe suppliers. Accounts receivable is what customers owe you. With accounts payable and receivable outsourcing, we record the bills and invoices, track due dates and follow up with customers. You keep control of the bank account.
Payables are also a legal question. Section 15 of the MSMED Act, 2006 sets payment deadlines for micro and small suppliers. Section 43B(h) of the Income-tax Act, 1961 links your tax deduction to those deadlines. Rule 37 of the CGST Rules takes back input tax credit on bills unpaid for 180 days. A payables desk has to watch all three.
Who it applies to
You buy from many small vendors
Factories buying raw material, job work and packing from dozens of suppliers, many of them micro or small units.
You sell on credit
You lose track of who has paid, which invoice was short-paid and which credit note is pending.
You have no finance team yet
One accountant handles bills, collections, GST and TDS together. Something always slips. Often it is the monthly book-keeping itself.
Why it matters
Keep your tax deduction in this year
Under Section 43B(h), a bill from a micro or small enterprise paid after the Section 15 deadline is deductible only in the year you pay it. Picture a Faridabad auto-parts maker that books a casting supplier’s bill in February and pays in May. That expense moves to next year. The Income-tax Act, 2025 applies from tax year 2026-27 and renumbers sections, so we map each rule to its new section when we file.
Hold on to your GST credit
Leave a supplier unpaid for 180 days from the invoice date and the input tax credit on that bill is reversed, with interest if already used. Pay, and it comes back.
Bring customer cash in sooner
A weekly ageing list and steady reminders beat a frantic call in March. Disputes come up while everyone still remembers the order.
Documents required
For payables
- Vendor list with PAN, GSTIN and bank details
- Udyam registration numbers of MSME suppliers
- Purchase orders, goods receipt notes and bills
- Agreed credit terms with each supplier
For receivables
- Customer list with credit limits and terms
- Sales invoices, e-invoices and credit notes
- Customer statements and confirmations
- Your Udyam certificate, if you are an MSME
Access and records
- Read access to your accounting software
- Bank statements, monthly or by feed
- GST portal data: GSTR-2B and GSTR-1
- Approval matrix: who signs off payments
The payment clocks on every invoice
| Rule | What it says | What it costs if missed |
|---|---|---|
| MSMED Act, Section 15 | Pay a micro or small supplier by the agreed date, at most 45 days from acceptance | Compound interest with monthly rests at three times the RBI bank rate (Section 16) |
| Income-tax Act, Section 43B(h) | Expense allowed in the year of payment if paid after the Section 15 deadline | Higher taxable profit in the current year |
| CGST Act, Section 16(2) and Rule 37 | Pay the supplier within 180 days of the invoice date | ITC reversed in GSTR-3B, with 18% interest if already used; re-claimed on payment |
| Form MSME-1 | Companies report dues to micro and small suppliers beyond 45 days, half-yearly | Penalty under Section 405 of the Companies Act |
Here is the catch: the MSME rules protect micro and small suppliers only, and medium enterprises are outside Section 15. So on day one we tag every vendor by its Udyam category. For a fabricator in Ballabgarh, that usually turns a long creditor list into a short list of bills that must go first.
How it works
Clean the vendor and customer masters
We check PAN, GSTIN, Udyam category and credit terms for every party, and remove duplicates.
Record and match every bill
We match bills to purchase orders and goods receipts, then to GSTR-2B, so you claim credit only on invoices the supplier has reported.
Prepare the payment run for your approval
Each week you get the list of what is due, MSME and 180-day bills flagged. You release payments from your own bank.
Chase and match customer receipts
We send statements and reminders and match each receipt to its invoice. In practice, a distributor’s customer often pays a round figure after deducting TDS and a rate difference; we split it out so the balance left is real.
Close the month with ageing reports
You get payables and receivables ageing, an MSME dues list and a short cash forecast, ready for your GST return filing and TDS cycle.
Timelines
45 days for MSME suppliers
Pay by the agreed date, capped at 45 days from acceptance. With no written agreement, 15 days.
180 days for GST credit
Counted from the invoice date. Unpaid credit is reversed in the GSTR-3B for the period right after the 180th day.
30 April and 31 October for MSME-1
Companies file Form MSME-1 by 31 October for April–September and by 30 April for October–March.
What happens if payments slip
You owe interest at three times the bank rate
Section 16 of the MSMED Act charges compound interest with monthly rests on late dues, and that interest is not tax-deductible.
A supplier can take you to the Facilitation Council
A micro or small supplier can refer the dispute to the MSE Facilitation Council under Section 18, which is meant to decide it within 90 days. Challenging its award needs a 75% deposit (Section 19).
The ROC can penalise a missed MSME-1
Section 405(4) allows a penalty of ₹20,000, plus ₹1,000 a day while the default continues, up to ₹3 lakh, with officers in default also liable.
Frequently asked questions
What is accounts payable and receivable outsourcing?
It means an outside team handles your bill processing and collections. We record supplier bills and sales invoices, track due dates, prepare payment lists for your approval, chase overdue customers and reconcile receipts. You still approve and release every payment from your own bank. Each month you get ageing reports and an MSME dues list.
Within how many days must I pay an MSME supplier?
Within the agreed credit period, but never more than 45 days from the day you accept the goods or services. If there is no written agreement, the limit is 15 days under Section 15 of the MSMED Act. Once your vendor master shows each supplier’s Udyam category, the deadline for every bill is easy to track.
How does Section 43B(h) affect my income tax?
A purchase from a micro or small enterprise paid after the Section 15 deadline is allowed as an expense only in the year you pay it. The rule applies from assessment year 2024-25. So a bill booked in February and still unpaid on 31 March, past its 45-day limit, adds to this year’s taxable profit. Paying on time keeps the deduction in the right year.
What is the 180-day rule for GST input tax credit?
If a supplier is not paid within 180 days of the invoice date, you must reverse the input tax credit on that bill. The reversal goes in the GSTR-3B for the period right after the 180th day, with 18% interest if the credit was already used. Once you pay, you can claim the credit again, and the usual Section 16(4) time limit does not block it.
Will you make payments from our bank account?
No. We prepare the payment list with amounts, due dates and bills, and your authorised signatory approves and releases payments in your own net banking. We do not hold client funds or banking passwords. Once payments go out, we record them and update the ageing the same week, so your books stay current.
Can you help recover dues from our customers?
Yes, for the routine part of collections. We send statements and reminders, and reconcile short payments and TDS. If you are a micro or small enterprise with Udyam registration and a buyer delays beyond 45 days, you can file a reference with the MSE Facilitation Council under Section 18 of the MSMED Act. We prepare the invoice-wise statement and interest working for that claim.
Which accounting software do you work in?
We work in the software you already use, such as TallyPrime or Zoho Books. If you are a company, your software must keep an audit trail that cannot be disabled, as required by Rule 3(1) of the Companies (Accounts) Rules, 2014 since 1 April 2023. We check this at the start, and you do not need to change systems to outsource this work.
How soon can you take over our payables and receivables?
Usually within the first month. The first two weeks go into cleaning the masters, collecting Udyam details and confirming open balances with parties. From the next cycle we run the weekly payment list and monthly ageing. Starting at the beginning of a quarter makes the GST and TDS handover simplest.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
Payables and receivables work carries no government fee.
Ready to begin?
Send us your vendor and customer lists for accounts payable and receivable outsourcing, and we will show you which bills are near the 45-day and 180-day limits.