How to recover old dues from shops without losing the shop

Every distributor has a list of shops that stopped paying. Not the ones that pay a week late: the ones whose oldest bill is three months old, whose owner is “not in” when the salesman comes, and whose balance nobody wants to look at. Each month the money is a little harder to get back, and a little more of your working capital is gone.

Old dues are rarely recovered by asking harder. They are recovered by making the figure certain, making payment easy, and making not paying slightly more uncomfortable each month.

Step 1: know exactly who owes what

Make a list of every shop with money older than your normal credit period. For each one, write the balance, the date of the oldest unpaid bill, and the date of the last payment. Sort by the oldest first, then by the largest. The top ten usually hold most of the money, and they are where the owner’s time goes. The method for keeping this list straight every week is in how to track shop credit without a notebook.

Step 2: agree the figure before asking for it

Many old balances are not refused, they are disputed. The shop remembers a damaged carton that was never credited, a scheme that was promised, a payment made to a salesman who has since left. Until that is settled, the shop has a reason not to pay any of it.

• Send the shop a statement: every bill, every payment and the balance, for the period.
• Ask them to check it and mark anything they disagree with.
• Split the balance in two: the part the shop agrees, and the part in dispute. Collect the first. Investigate the second separately, quickly, and settle it either way.
• Get the agreed figure in writing: a signed statement, or a short note in the shop’s hand saying the balance on that date. It ends the argument about the number.

Step 3: stop the balance growing

Put the shop on cash for new bills. Keep supplying if the shop still sells your goods; stopping supply often stops the payments too, and the salesman loses the reason to visit. The rule for the counter is simple: “Today’s bill in cash, plus the agreed amount off the old balance.”

Step 4: a fixed instalment, in writing

A shop that cannot pay ₹48,000 at once can often pay ₹3,000 every week. Agree the amount, the day, and what happens if a week is missed, and write it on one page that the shop owner signs. Record each instalment against the oldest bills first, and give a receipt every time. A shop that sees the balance fall each week has a reason to keep going.

Step 5: move up one step at a time

Most old dues are recovered at the third step. A distributor’s owner sitting with a shop owner and a statement carries a weight that no salesman does. Tell the shop what the next step will be before taking it; often that is enough.

The time limit you should know about

In India, a claim for goods sold on credit generally has to be made within three years. A written acknowledgment of the balance, signed by the shop before that period ends, gives a fresh period. That is one more reason for the signed statement in step 2 and the signed instalment plan in step 4. This is general information, not legal advice: ask a lawyer how it applies to your bills before relying on it.

When to write it off

Some money will not come back: a shop that has closed, an owner who has left the town. When the cost of chasing (the owner’s time, the salesman’s visits, a lawyer) is more than the amount, write it off, with your accountant, and stop carrying it as money you have. A written-off balance hurts once. A dead balance carried as an asset makes every month’s profit look better than it is. See how a distributor works out real profit.

So it does not happen again

• A credit limit for every shop, decided in the office: how to set a shop credit limit.
• A ten-minute weekly look at the oldest balances, before they are old.
• The right words at the counter, every visit: how to collect payments from shops.

How Mulberry Sales helps

The Credit Record shows every shop’s balance in age columns, so the list in step 1 is already made. Reports build one shop’s statement for any dates, with every bill, every payment, damage booked against it and what it owes, as a PDF or Excel file you can send for step 2 (Growth plan and up for the download). Set a shop’s credit limit at what it owes today (and lower it as the balance falls), and any bill that adds more credit is refused on the phone and on the server, while a bill paid in full on the spot still goes through: that is the cash rule in step 3, kept even when you are not there. A shop can also be put on hold so nobody bills it while the salesman keeps collecting, and every payment, including a small instalment, is recorded against a particular bill. Old balances from your notebook or Excel come in as opening balances, so the history starts complete. The instalment plan and any write-off stay your decision, on paper and with your accountant. See collection and credit control.

Questions people ask