How to recover a bad debt without going to court
A customer who owes you money and isn't paying is a business problem, a cash flow problem, and (if it's significant) an existential problem. Most bad debts in India are eventually recoverable without litigation — but the approach matters enormously.
The first escalation: personal engagement at a senior level. If your regular invoice follow-up has failed, the next step is a senior-to-senior conversation — founder to founder or MD to MD. Not accusatory, not threatening — 'I wanted to call personally because your account is overdue and I want to understand what's happening and how we resolve this.' Senior engagement often unlocks payments that AP-level follow-up can't.
Propose a payment plan. If the customer is genuinely struggling, a rigid demand for full payment by a fixed date may be less effective than a structured plan. Agreeing to three equal monthly payments, documented in writing, often recovers more than an ultimatum. A signed payment plan is also enforceable if they don't follow through.
Legal notice from a lawyer. A formal letter of demand from a lawyer — sent by registered post with acknowledgement due — has a disproportionate effect on payment behaviour. It signals seriousness without committing you to litigation, and it starts the paper trail that becomes important if you do go to court. Cost: ₹3,000–10,000 for a professional demand notice.
Stop supply immediately. Once a customer is significantly overdue, stop all further supply regardless of their new orders. Continuing to supply a defaulting customer increases your exposure. Pause supply, formally, by written notice.
MSME Samadhaan: if your company is MSME-registered and the defaulting party is a large company or PSU, the MSME Samadhaan portal allows you to file a facilitated dispute with the MSEFC (MSME Facilitation Council). The council is empowered to facilitate conciliation and, failing that, arbitrate the dispute. This is faster and far less expensive than civil court.
FACILITY MANAGEMENT (ADVANCED)