B2B sales in India: a practical guide for small businesses

How B2B sales in India differs from selling to shoppers

B2B sales in India runs on three things: trust, credit and follow-up. A shopper pays at the counter and leaves. A business buyer wants a quotation, raises a purchase order, expects delivery against a proper invoice, and pays weeks later. Small businesses that sell to other businesses do well when they handle each of those steps cleanly.

• More than one person has a say. In a small firm the owner decides. In a bigger one, the person who uses the product, the purchase team and accounts each have a voice.
• Credit is expected. Terms such as 30 or 60 days from the invoice date are common in many trades, and the supplier carries that cost.
• The tax invoice matters. A GST-registered buyer usually wants a proper tax invoice showing your GSTIN, so that it can claim input tax credit. An informal bill can cost you the order.
• Repeat orders are where the money is. One reliable supplier can keep an account for years. Quality and delivery on the tenth order matter more than the price on the first.

The sales cycle, from first call to repeat order

1. Find the buyer. Referrals, trade fairs, marketplaces, or a ready list of businesses in your trade and city. Our guide on finding B2B clients covers seven ways.
2. First conversation. Learn what they buy, from whom, how much, how often, and who approves it.
3. Sample, demo or trial. Buyers rarely switch suppliers on a promise. Let them test the product on their own line or with their own staff.
4. Quotation. Written, numbered and clear (see below).
5. Negotiation. Trade a discount for something in return: a bigger quantity, faster payment, a longer commitment.
6. Purchase order. Their written commitment to buy.
7. Dispatch and invoice. Goods go with your tax invoice and the transport documents.
8. Payment. Collected on the agreed date, with polite reminders.
9. Review and reorder. Call after delivery to ask how it went, and again before you expect them to run out.

Writing a quotation a buyer can approve

A purchase manager often has to show your quote to someone else. Make it easy to compare and sign off:

• the buyer's name and GSTIN, and a quote number and date;
• each item with its size, grade or model, and the HSN code (or SAC for services);
• the rate per unit, with GST shown separately;
• freight, packing and loading: included or extra;
• the delivery time and place;
• payment terms, written out ("payment within 30 days of invoice date");
• how long the rate is valid, because raw material prices move;
• a named person with a mobile number.

Two days after sending it, call: "Did the quote reach the right person? Any questions on the rate?" Then follow up weekly, and stop when they say the order has gone elsewhere. Ask why; the answer is useful.

Purchase orders, invoices and dispatch

Do not dispatch on a phone call. Ask for a purchase order (PO), or at least a written confirmation by email, and check it against your quote: quantity, rate, delivery address, billing name and GSTIN, payment terms, and the PO number they want printed on the invoice. Accounts teams at larger companies often will not pass an invoice without that number.

Your invoice should match the PO line by line. Moving goods may also need an e-way bill, depending on the value and the kind of movement, and larger businesses have to issue e-invoices. The rules change, so ask your CA what applies to you. Get the receiver to sign and stamp a copy of the invoice or delivery challan: proof of delivery settles many payment disputes before they start.

Credit terms and getting paid

• Check before you give credit. Look up the buyer's GST registration on the GST portal and, for a company, its MCA master data; our guide to free company look-ups shows how. Ask other suppliers in the market how the buyer pays.
• Start small. Ask for an advance or part-advance on the first order, and offer credit once two or three orders have been paid on time.
• Put the terms on every document: quote, PO acknowledgement and invoice.
• Follow up on a calendar. A polite message a week before the due date, a call on the day, a statement of account at month-end. If a payment is two weeks late, speak to the owner or the finance head, not only the accounts clerk.
• Know your protection. If you are a micro or small enterprise with an Udyam registration, the MSMED Act protects you against delayed payment by buyers, and the government's MSME Samadhaan portal takes such cases. Take advice from a professional before you use it.

Large companies and government buyers have their own vendor registration and payment cycles. Our guide to reaching purchase managers explains how to get on approved vendor lists.

Questions people ask

Do I need GST registration to sell to businesses?

Whether you must register depends on your turnover, your state, what you sell and whether you sell across state lines, so ask a CA. In practice, many business buyers prefer a registered supplier because they can claim input tax credit on your invoice.

What payment terms should a small supplier offer?

Only what you can afford to finance. Work out how much money would be stuck with buyers if every one of them took the full credit period, and check that you can carry it. Advance for new buyers and short credit for proven ones is a sensible start.

What if a buyer does not pay?

Stop further supplies on credit, send a written reminder with a statement of account, and speak to the owner directly. If that fails, take legal advice before you send any legal notice.