CompareUdhaar
Open his khata now, or keep him on cash first?
A new customer asks for a khata. Open it today on a small amount, or keep him on cash for a month first? Both cases, the arithmetic, and a clear answer.
A new face asks for a khata: five steps
- 1Ask where he lives or worksAn address you could walk to beats four weeks of waiting.
- 2Ring his number while he is standing thereA number that answers today is a number that answers later.
- 3Open the khata the same day, at a small amountAbout one day's earning, never one week's.
- 4Say the limit and the day out loudA limit spoken as a promise is not an insult.
- 5Raise it only after he clears it onceOne clean settlement buys the next step. Nothing else does.
Open it today, but keep it small. A first limit you could lose without pain teaches you more in three weeks than a month of watching him pay cash. Waiting is the right call in two situations, and only two. Here is the honest comparison, and the arithmetic behind both.
What each policy actually is
Two shopkeepers on the same street run this differently and both are right.
The first policy is simple. He asks, you open the khata the same day, at a small first amount. His name, his number and where he lives go into the book before the goods go out of the door. You tell him the limit and the day you expect it back, out loud, in front of him.
The second is the waiting policy, and it is only a policy if it has two things a calendar can hold: a stated stretch, and a stated moment when it ends. "Cash for four weeks" is a policy. "Cash for your first eight purchases" is a policy. "Let me see how it goes" is not. It is an indefinite no in a polite coat, and the customer hears the difference.
The ending matters more than the wait. If the four weeks pass and he has to ask again, you ran a slow refusal. Mark the date somewhere you will see it, and on that morning open the khata yourself, before he raises it. That turns a wait into a relationship rather than a rejection.
The case for opening the khata today
Start with the part nobody says out loud: the shop at the other end of the street will open one. A man refused credit does not go home and stop buying. He walks two hundred steps and asks somebody else, and whoever says yes gets the next four years of his buying.
That is what a khata really is. Cash makes a passer-by, a khata makes a regular. A cash customer belongs to whoever is nearest when he needs something; a khata customer comes back because his account is here.
The stronger argument is about learning. A man can pay cash for six months and still be a poor khata customer, because paying now and paying later are not the same skill. The only real test of how somebody behaves when he owes you money is to let him owe you a little money.
Ten in the morning, a slow hour. Adnan has been in four times in two weeks, always polite, always cash, and now he asks. You open the khata at Rs 1,500. Nothing happens for eight days and then it does: he arrives on the ninth, one day after he said, and pays the whole amount without being reminded. In three weeks you know he runs slightly late and settles in full. Three months of cash would have taught you none of that.
The first khata is also the moment a customer decides whether you are a shop or his shop. How much to give, and to whom, is worked through in how much udhaar to give.
The case for keeping him on cash first
The other side is stronger than most shopkeepers admit.
The cheapest bad debt is the one you never handed over. Every recovery method costs you something: a walk, a phone call, an argument, a customer who stops coming. Not giving costs nothing.
A waiting period is cheap by design. It does not cost you a customer, it costs you a few sales you were never sure of. If he is genuine he buys in cash for four weeks anyway.
It also catches one specific man, and he is real: the one going shop to shop opening khatas. New to the area, friendly, in a hurry, wanting an account at five shops before anybody compares notes. A waiting period removes him for free, because he cannot wait four weeks at five shops. He needs it now, which is exactly why he is asking.
Thursday evening, the shop full, three people behind him. A man called Zubair, well dressed, first visit, picks Rs 6,000 of goods and asks for a khata on the spot. He cannot say which street he lives on, only "near the big crossroads". He gives a number and does not want you ringing it while he stands there. None of that is a crime. But everything you know about him you learned in ninety seconds, and Rs 6,000 is a large bet on ninety seconds.
Waiting protects the people already on your list too. Every rupee sitting on a stranger is a rupee not available to a customer of nine years who needs flour on a bad week. Whether to sell on credit at all is covered in cash only or udhaar.
The two policies side by side
The same new customer, handled two ways
Two rows decide it for most shops, and they are not the rows people argue about.
The first is what you learn. Waiting teaches you almost nothing, because cash behaviour and credit behaviour are different behaviours in the same man. The second is what being wrong costs, and it costs in a different shape in each column: once on the left, and every month on the right.
Notice what the table does not claim. Waiting does not turn a bad customer into a good one. Opening today does not make a good customer pay faster. Neither stops a man taking goods and vanishing, and if that has already happened, what to do next is a separate job.
What it costs to be wrong, either way
Both policies are wrong sometimes. The difference is the shape of the mistake, and it is worth putting numbers on it.
Say: the price of getting it wrong, each way
Example numbers only, never a survey. Put your own margin and your own count into the same six lines.
Read the shape, not the numbers. Being wrong the first way is a hole: it happens once, it hurts, and it stops. Being wrong the second way is a leak. It runs for as long as the rule runs. Shopkeepers see holes and never see leaks, which is why the fear of bad debt is usually larger than the bad debt.
Then there is the other half of the sum. If the man you made wait was honest all along, the wait bought you nothing.
Say: one genuine new customer, first twelve months
Example numbers, not a survey. Your own basket size and your own margin move every line in this table.
The row with the zero next to it is the whole argument. Caution has a price, and it is only worth paying against the man who came to take you. Aimed at the wrong one it is pure cost, and you never see it leave.
The middle path: open it today, but small
This is what most good shops run, and it beats either pure version. Three parts, all three necessary.
First, an amount you could lose entirely without it changing your week. Work it out instead of guessing. Say your shop sells about Rs 12,000 on an ordinary day and you keep about 14 rupees out of every 100, which is roughly Rs 1,680 of margin in a day. A first limit of Rs 1,500 at your selling price is about Rs 1,290 of stock at what you paid for it. If he disappears with all of it, you are down about three quarters of one day's earning. That is the test. Not "can I afford this", but "could I lose it and still sleep".
Second, a short first cycle. One week, or up to the day he gets paid, whichever arrives sooner. A long first cycle is not generosity, it is a delay in learning.
Third, the limit rises only after he clears it once. Not after he pays half. Not because he asked nicely. Rs 1,500 cleared in full buys Rs 3,000. Rs 3,000 cleared in full buys Rs 5,000. Move up by roughly the step he just proved.
Say the limit out loud as you open it, because a limit nobody stated is one you will have to defend later in front of other customers. "I can start you at Rs 1,500. Once that clears, we can make it more." That is a promise rather than an insult, and almost everybody hears it as one. For the step above what you can afford to lose, a guarantor is the tool.
Judge the man, not the calendar
Time on its own is a weak filter, and this should worry anybody running a strict waiting rule. A patient man passes a four-week wait as easily as an honest one. Somebody planning to take you for Rs 20,000 can pay cash for four weeks without blinking. The calendar filters out the impatient, not the dishonest.
These four tests do more in five minutes than four weeks of waiting.
Can you find him? Not his phone. Him. Does he live or work inside the streets you could walk in ten minutes? An address you could stand in front of beats any waiting period, because the whole risk of credit is a man you cannot reach.
Does his number answer now? Ring it while he is at the counter, with a smile, "let me save it properly". A man who does not want you ringing it today is telling you something about the day you ring it for a worse reason.
Does he take the smaller amount without a fight? Offer Rs 1,500 when he asked for Rs 6,000 and watch his face. The genuine one says that works. The one in a hurry argues for the full amount on day one, which is not how a man behaves about money he means to bring back.
Does he ask your terms, or step around them? "When do you want it back?" is the best sentence a new khata customer can say. A man who never asks when, and changes the subject when you tell him, has shown you how the first settlement will go.
One more beats all four: does anybody on your list know him? A sentence from a customer of nine years beats a month of watching.
Saying "not yet" is the skill, and it is why shopkeepers avoid waiting at all. Make the wait about your rule, never about him:
"My rule for a new khata is four weeks of buying first. Same for everybody, my own cousin included."
"I am not saying no. I am saying the fourth Friday from today. Come that morning and I will open it myself."
If he pushes hard, you have a better answer than a fight: "I can do Rs 1,500 today instead of waiting, if that helps." That is the middle path, which was the stronger answer anyway.
The rule is what protects the friendship, because it is the rule refusing and not you. Keep it identical for everybody and say so: the moment he decides the wait was personal, you have paid the full price of waiting and collected none of the benefit. There is more in keep regular customers.
The answer, and the two things that change it
For most shops: open it today, at an amount you could lose, and raise it only after one clean settlement. That is not a fence-sit. The mistake on one side is small and finite. The mistake on the other is invisible and continuous. A small first limit gives you the learning of the open policy with most of the safety of the waiting one, in three weeks instead of four.
Two things flip it, and only two.
The first: he wants more on day one than you can afford to lose, and will not come down. That is no longer a new-customer question, it is a big-amount question. Wait, take a guarantor, or turn it into a qist plan with written dates.
The second: you cannot find him. No street you know, no workplace you could walk to, a number that does not ring, nobody who knows his father's name. Then waiting is not caution, it is the only tool you have, and four weeks of cash is a fair price for an address.
Whichever policy you run, the record is what makes it work, because the method rests on seeing how he behaved last time. That is the part memory drops first, once your list is past thirty names. Wasoolo is 100% free to download, and opening a new customer in it takes about a minute: his name, his number, the small first amount, and the date you expect it back. His history is what tells you whether to raise the limit, because Wasoolo dates every entry and you can see whether he settles on the day or nine days after. When the step gets big enough you can record a guarantor against the khata, and send him a PDF statement of his own account.
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Common questions
He is my neighbour's brother. Do I still make him wait?
Treat him as a new customer with a good reference, because that is what he is. The reference beats a waiting period, so skip the wait and use the small first limit. State the limit and the day out loud, exactly as you would for a stranger.
How small should the very first khata be?
Small enough that losing all of it would annoy you and nothing worse. For most small shops that is between half a day's earning and one full day's, so a first limit around Rs 1,000 to Rs 2,000 at your selling price. If the number makes your stomach tighten, it is too big.
He asked for a khata on his very first visit. Is that a bad sign?
On its own, no. People move house and need an account somewhere. What matters is what follows: where he lives, whether his number rings, and how he reacts when you offer less than he asked for. First visit plus a large amount plus a vague address is the worrying combination.
What if he clears the first amount, but only after a lot of chasing?
He passed the test you set and failed the one that matters more. Keep him, leave the limit where it is, and shorten the cycle instead of stretching it. A customer who always pays in full and always pays slowly should stay on a small limit.
I run a waiting period. How do I remember whose four weeks are up?
Write him into your list the day he asks, with a zero balance and the agreed date beside his name, before he has taken anything. Then the date sits where you already look. The worst version of waiting is the one where you both forget.
Should the rule be the same for everybody?
The rule should be, the amount should not. Say the same sentence to every new face, then set the first limit by what you know about him: an address you could walk to, a number that answers, and a customer who knows him all earn a bigger start.
If you are weighing up a customer you cannot read, or setting a first limit and want a second opinion, write to us and tell us the situation.