Managing Government & PSU Receivables in India: A CFO Guide

Managing Receivables When Your Customers Are Government or PSUs

12 January, 2026

By CFOSME

If your biggest customers are government departments or PSUs, you already know this truth: sales are guaranteed, but cash is not.

On paper, things look better than before. Delayed payments to Indian businesses have come down to ~₹7.34 lakh crore as of March 2024, lower than previous years. But for MSMEs and mid-sized suppliers, that number hides the real pain, months of capital locked inside “approved but unpaid” invoices, while payroll, GST, and vendors wait every 30 days.

This is where most companies go wrong. They treat government receivables as a patience problem instead of a process problem.

At the same time, something important has changed in the last three years. TReDS financing volumes doubled in FY24, with over ₹1.46 lakh crore worth of invoices financed. That tells us one thing clearly: managing receivables from government and PSUs is no longer about “waiting it out.” It’s about structuring contracts correctly, tracking approvals aggressively, and using financing as a planned cash-flow tool, not a last resort.

This is a step-by-step, operational guide on how Indian companies actually manage receivables when their customers are government bodies or PSUs, without damaging relationships, without legal overreach, and without letting unpaid invoices choke working capital.

How Government & PSU Payment Cycles Actually Work in India

Before you can manage government receivables, you need to understand where your invoice actually travels after delivery, because delays rarely happen at “payment stage.” They happen much earlier, inside approval and routing layers that most vendors don’t actively track.

Once goods or services are delivered, a government or PSU invoice typically moves through five internal checkpoints:

Delivery & Acceptance: Goods/services are delivered to the consignee or user department.
CRAC / SDAC Generation (Acceptance Certificate)

For goods: CRAC (Consignee Receipt & Acceptance Certificate)
For services: SDAC (Service Delivery & Acceptance Certificate)

This confirms that delivery meets contract terms.

Departmental Finance Verification: Internal finance checks invoice accuracy, GST compliance, PO linkage, and budget head.
DDO / PAO Routing

DDO (Drawing & Disbursing Officer) initiates payment
PAO (Pay & Accounts Office) authorizes and releases funds

Treasury / Bank Release: Final disbursement through government treasury systems or PSU banking channels.

Key reality: Your invoice is “approved” long before it is “paid.” The longest delays happen between acceptance (CRAC/SDAC) and finance/PAO clearance, not at the bank.

GeM as the Canonical

The Government e-Marketplace (GeM) is often cited as proof that government payments are now fast—and technically, that’s true.

According to GeM SOPs and manuals:

CRAC is auto-generated once delivery is confirmed (or after a defined timeline if no objection is raised).
Payment is expected within 10–15 working days after CRAC generation.

However, in practice, many vendors experience:

30–45 day payment cycles, even after CRAC is visible on the portal.

Why?

Because CRAC alone does not trigger payment. It only unlocks the next layers:

Departmental finance verification
Budget availability confirmation
PAO routing and scheduling

A single missing document, incorrect GST breakup, mismatch between PO and invoice, or delayed consignee confirmation can quietly stall the file without any automated alert to the vendor.

This is why vendors often say:

“The CRAC is done, but payment hasn’t moved.”

They’re right. But incomplete.

How to Manage Receivables When Your Customers Are Government or PSUs

When your customers are government bodies or PSUs, receivables are driven by process, not payment terms. Approval cycles, documentation checks, and administrative delays stretch cash inflows beyond control. Managing receivables here means designing systems that absorb delays without breaking working capital.

Step 1: Set Up the Contract to Protect Your Receivables

Government receivable delays usually begin at the contract stage, not during payment follow-ups.

Your contract or PO must clearly define how acceptance happens, because payment does not move without CRAC (for goods) or SDAC (for services). Specify who issues the acceptance, how soon after delivery, and what counts as deemed acceptance if no objections are raised. On non-GeM PSU contracts, this is often manual, and ambiguity here directly causes payment stalls.

Avoid vague clauses like “30 days from invoice.” Instead, define payment timelines from CRAC/SDAC issuance, since that is the real trigger in government systems.

Also identify who actually pays, department, PSU finance, or PAO and whether treasury routing applies. Escalations only work when directed correctly.

Where possible, include delay-protection clauses (statutory references, escalation rights, or supply suspension thresholds). You may not enforce them often, but their presence changes internal priority.

Step 2: Prepare a Government-Ready Invoicing Process

In government and PSU contracts, payment speed is decided by invoice accuracy. Even on GeM, where CRAC can be auto-generated, invoice–PO mismatches are the most common reason payments slip from the expected 10–15 days to 30–45 days.

A “government-ready” invoice is not a standard commercial invoice. It must survive system validation, finance scrutiny, and PAO checks without manual intervention.

Use this checklist before submission:

Correct PO / Work Order reference (exact match to system entry)
Unique invoice serial number (as per GST rules)
HSN/SAC codes aligned with PO line items
GSTIN of buyer & seller (correct registration type)
Clear tax breakup (CGST/SGST/IGST as applicable)
CRAC / SDAC reference (or delivery confirmation linkage)
Delivery challan / service completion proof
Digitally signed invoice PDF
TDS deduction fields (where applicable)
Correct bank details matching vendor master
Department contact person / consignee details
Any mandated annexures or compliance declarations

Step 3: Track Each Invoice Through the Government Approval Chain

Once an invoice is submitted, waiting without tracking is the fastest way to lose control. Government payments don’t fail, they stall inside approval queues unless actively monitored.

At minimum, your tracker should capture: