MSME stands for Micro, Small and Medium Enterprises. It is a term used to classify businesses based on their size and investment. MSMEs play a crucial role in the economy of many countries, including India, by generating employment and contributing to the GDP.

­Micro enterprises: Investment in plant and machinery or equipment up to Rs. 25 lakh and turnover up to Rs. 50 lakhs.

Small enterprises: Investment in plant and machinery or equipment up to Rs. 5 crore and turnover up to Rs. 50 crores.

Medium enterprises: Investment in plant and machinery or equipment up to Rs. 10 crore and turnover up to Rs. 250 crores.

MSME 45 Days Payment Rule

In India, the MSME Act has introduced a 45-days payment rule for Micro & Small Enterprises. Section 43B(h) of the Income Tax Act mandates that large companies (defined as those with a turnover exceeding Rs. 500 crore) must clear payments to MSMEs within 45 days of delivery of goods or services. If there’s a written agreement specifying a different payment term, that term applies, as long as it’s not longer than 45 days. In the absence of a written agreement, the payment window shrinks to 15 days.

So, if you are a Micro or Small enterprise, and you have sold goods or provided services to a Buyer, the Buyer must make payments for the goods or services within a maximum period of 45 (Forty-Five) days from the date of the delivery of the goods or services.

This MSME 45 days payment rule aims to improve the cash flow and liquidity of MSMEs, which often face challenges in managing their working capital due to delayed payments from buyers.

Why is it significant?

Delayed payments are a major roadblock for MSMEs, often crippling their cash flow and hindering their growth. This rule aims to ensure timely payments, improving financial stability and boosting the MSME sector.

Current status:

• The rule was notified in November 2023 and came into effect from April 1, 2024.
• While it’s a positive step, some initial confusion and concerns exist regarding its implementation and potential impact on business relationships.

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Control accounts are used in accounting to summarize the balances of a group of individual accounts, typically those with a large number of transactions. They are used to keep the general ledger free of clutter and make it easier to prepare financial statements.

Here are the main purposes of having control accounts:

• To summarize the balances of a group of individual accounts: Control accounts provide a quick and easy way to see the total balance of a group of accounts, such as accounts receivable or accounts payable. This can be helpful for financial statement preparation and analysis.

Control accounts in accounting

• To reduce the number of entries in the general ledger: By using control accounts, you can avoid having to record each individual transaction in the general ledger. This can save time and space.
• To provide a level of control over the subsidiary accounts: Control accounts can help to ensure that the total of the subsidiary accounts agrees with the balance of the control account. This can help to prevent errors and fraud.

Here are some of the most common types of control accounts:

• Accounts receivable control account: This account summarizes the balances of all of a company’s customers’ accounts.
• Accounts payable control account: This account summarizes the balances of all of a company’s suppliers’ accounts.
• Inventory control account: This account summarizes the balances of all of a company’s inventory accounts.

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Consult value services we offer both onsite and remote bookkeeping services for businesses. Fully tailored to your needs, you’ll get a qualified accountant who’ll take time to understand your business and provide valuable financial recommendations.

Most companies choose an ongoing bookkeeping service, but we can also offer one-off project work to help bring your accounts up to date. Whichever option you choose, we’ll make the process quick and straightforward so you can focus on running your business.

From solo entrepreneurs to large businesses, bookkeeping is a     critical part of accountancy. Let us free up your time, provide a real-time view of your business finances, and help you make the most of available tax relief.

Please visit www.consultvalue.in and call +91 9315975635