When a supplier pays you back in goods, not cash

A credit from a supplier is your money, held in his shop. It stays real only if it is written against his name with a date and a reason, and read out before you pay his next bill. Take it for small amounts in goods you chose. For anything large, or goods he picks, ask for cash.

What a credit really is

Something arrived wrong. A crate of twelve came with four bottles cracked, a carton was two packs short, a lot of milk powder went off a month before its printed date, or the "buy ten, get one free" carton never got off the van. The supplier's man does not open his wallet. He says the four words every shopkeeper knows: adjust it on the next bill.

That sentence turns money into a credit, and a credit is a different animal. Cash back is yours tonight, and you can spend it on rent, on a different supplier, on your own house. A credit is your money held by him. You can spend it only in his shop, only on his goods, only at his rates, and only for as long as you keep buying from him. If he raises his prices next week, your Rs 6,000 buys less. If you stop buying from him, it buys nothing. Most shopkeepers have never once said that sentence to themselves, and it is the whole subject.

None of this makes a credit bad. It is part of how stock bought on credit works, and a small credit against a regular supplier is fine. It only has to be treated as what it is: yours on paper, his in practice, until the day it comes off a bill.

How a credit quietly stops existing

Tuesday, eleven in the morning. Ashraf runs a general store on a school road, and the biscuit van is outside. Two Tuesdays ago the carton of chocolate wafers came six packs short, and Kamran, the van boy, said the usual thing: adjust it on the next bill. Rs 1,850 at buy rate. Ashraf nodded. Nobody wrote anything.

Now Kamran is at the counter with today's bill, Rs 12,400 printed at the bottom, and three customers are waiting. Ashraf counts out Rs 12,400. Kamran signs, thanks him, and drives to the next shop. The Rs 1,850 has just stopped existing.

Nobody stole it. Kamran is not a cheat, and Ashraf is not careless. The credit simply never lived anywhere except in two men's memory, and one of those men has fifty shops on his route and a new short carton at every third one. Ask Kamran a week later and he will honestly not remember. Ask his company's office and there is no record, because the office only knows the printed bills, and every printed bill was paid in full.

This is the real cost of a credit, and it is not the supplier being dishonest. It is that the printed total is loud and the credit is silent. When the bill and the boy and the queue all arrive at once, the loud number wins. Every time.

The three lines that keep it alive

A credit survives only if it is written down at the moment it is born, against the supplier, not on a slip that lives in the drawer.

The three lines that keep a credit alive, and the habit that redeems it

1. 1The date and the amountThe day it happened and Rs 6,000 at buy rate, written against the supplier's name, not on a loose slip.
2. 2Why, with the referenceCrate 14, four cracked, bill 2231. A reason his office can check ends every argument before it starts.
3. 3Which bill it comes off, in which goodsNext Saturday's bill, in the 400 gram tins. Said out loud and written on both copies.
4. 4Read it before you payOpen his page at the counter with the boy standing there. The credit comes off first, then you count the money.

The date and the amount are obvious. The reason with its reference is the line most people skip, and it is the one that ends arguments. "Crate 14, four cracked, bill 2231" can be checked by his office. "Some bottles a while back" cannot. The fourth line, which bill it comes off, is what turns a wish into a plan.

Then the habit that actually redeems it. Before you pay any bill from that supplier, you open his page and read it, at the counter, with the boy standing there. Not afterwards, when the money has gone. Before. "There is Rs 1,850 against you from the wafer carton. Take it off this one." The printed total becomes Rs 10,550, the boy writes the adjustment on his copy, and the credit is redeemed in front of a witness.

It sounds slow. It takes twenty seconds.

When to take a credit gladly

A credit is the easy answer when three things are true at once.

You buy from him every week anyway, so the money will come off a bill within days, not months. The amount is small against your normal bill, so a Rs 1,850 credit on a Rs 12,000 weekly order is nothing to argue over. And the goods you take it in are ones your shop sells fast, so the credit turns into cash almost as quickly as cash would have.

When all three hold, asking for notes instead just makes the boy's day harder for no gain. Take the credit, write the three lines, read them out on the next bill, and move on. The same logic applies whether you keep one supplier or several: a credit is safe where the buying is regular.

When to ask for cash instead

Four situations, and in each one you should say, politely and specifically, that you would rather have the money.

When the amount is large against your weekly buying. A Rs 6,000 credit on a Rs 40,000 weekly order comes off in one bill. The same Rs 6,000 against a supplier you buy Rs 3,000 from each fortnight will take months, and every one of those months is a chance for it to be forgotten, disputed, or eaten by a price rise.

When you are thinking of leaving him or cutting him down. A credit is only worth something while you keep buying. If you have half decided to move your biscuit line to a distributor with better terms, a credit with the old one is a chain. Take the cash and leave clean.

When he wants to settle it in goods he chooses. This is the classic move, and it is worth naming. Your Rs 6,000 credit comes back as Rs 6,000 of the new shampoo line, or the juice nobody on your street has asked for, or the biscuit variant that was slow before and is still slow. A real loss has just become dead stock on your shelf, and dead stock is a loss that has learned to hide.

When the credit would take months of normal buying to use up. A credit older than a month has already started to fade.

Say: the same Rs 6,000 credit, taken two ways

The credit, from one carton with broken sealsRs 6,000

A. Taken in the 400 gram tins you chose, all sold in three weeks at your normal rateRs 6,600

B. Taken in the flavoured line he pushed, the part that sold in three months, at a cut priceRs 1,800

B. Still on the shelf after three months, at cost, nearer expiry than purchaseRs 4,000

Cash gap between A and B after three monthsRs 4,800

The gap is not small. The same Rs 6,000, chosen by you, is Rs 6,600 in the till in three weeks. Chosen by him, it is Rs 1,800 in the till after three months and a shelf of stock now nearer its expiry date than its purchase. That difference is the price of not saying one sentence at the counter.

The middle path most shops should take

You will rarely refuse a credit outright, and you rarely need to. The middle path is to accept it and pin it down out loud, at the time, on two points: the goods it will be taken in, and the bill it will come off.

Saturday, a quarter past six in the evening. Nadeem's shop is filling with the evening crowd, and Rafiq from the milk powder company is at the counter with the delivery. Eight of the twelve tins in one carton have broken seals. Rs 6,000 at buy rate. Rafiq says it before Nadeem can: adjust it on the next bill.

Nadeem does not argue and does not simply nod. "Fine. Adjust it on next Saturday's bill, in the 400 gram tins, the ones that sell. Not the new flavoured one. Write it on your copy, and I am writing it on mine." Rafiq writes. Next Saturday, before Nadeem pays a rupee, he reads the line out, Rafiq finds it on his copy, and the bill drops by Rs 6,000 in the goods Nadeem actually wanted.

At the counter, when the boy says: adjust it on the next bill

✓Say this

• Fine. Rs 6,000, crate 14, four cracked. Write it on your copy, I am writing it on mine.
• Adjust it on next Saturday's bill, in the 400 gram tins. Not in anything else.
• Before I pay: the Rs 6,000 from the broken carton comes off this bill first. Show me where.
• This is a big amount for my shop. I would rather have it in cash, or half in cash.

✕Not this

• No problem, we will see it next time.
• Adjust it somewhere, whatever is easy for you.
• The new shampoo? Fine, put that in, it will cover it.
• Take the payment now, I will check the old slip later.

Both columns are polite. The left one has an amount, an item and a date in it, and the right one has none. A sentence without those three things is one the boy cannot write down even if he wants to.

Money owed to you belongs in the book too

Here is the bigger habit hiding behind all of this. Most shops record what they owe a supplier with great care, because the supplier will certainly ask. Money a supplier owes them is kept in memory, because nobody is going to come and ask for it on their behalf. A shop that records only one direction is reading half of its own position.

Put the supplier in your book as a party with his own balance, exactly the way a customer has one. Bills you take on credit push the balance one way. Payments pull it back. A credit from a broken crate is an entry in your favour, with its date and its reason, and it stays open until a bill takes it off. This is also the only clean way to handle a supplier who is also a customer: one name, one running balance, both directions on the same page.

In Wasoolo a supplier is a party with his own page, so a Rs 6,000 credit sits as a real open amount, dated, with the reason typed beside it, until you mark it adjusted against a bill. It cannot evaporate the way a memory does, and it is there when you open his page at the counter. You can keep the same discipline in a paper bahi, a ledger book, with one page per supplier and both columns on it. What Wasoolo adds is that the page is in your pocket when the van arrives.

The shop that records credits is not a suspicious shop. It is a shop where the boy knows the Rs 1,850 will be read out next Tuesday, so he writes it on his side as well, and both of you stop relying on memory. That is the entire trick.

Common questions

The supplier's boy says his office does not allow credits, only replacement goods. What then?

Then the credit is in goods, and you choose which goods. Say the item and the quantity at the counter, write it as a credit against the supplier with the bill reference, and take the replacement on the next delivery. If it never arrives, the line is still open in your book and you can show it to his office.

How long should I let a credit sit before I chase it?

One delivery cycle. If you buy weekly, it should come off the very next bill. If it has survived two bills, stop paying the full printed total and take it off yourself, with the reference read out, before you hand over anything.

What if the boy has left the company and the new one knows nothing about it?

This is exactly why the reason and the bill reference matter. A credit written as "bill 2231, crate 14, four cracked" can be checked by any office. Show the new boy your line, ask him to call his office, and hold that amount back from the next bill until they confirm. Nothing written means nothing to show.

Should I take a credit as a reduction on the next bill, or as free goods?

As a reduction on the bill, in money, whenever you can. Free goods are only worth their buy rate if they are goods you were going to order anyway. A reduction on the bill is Rs 6,000 of real money, and it cannot turn into a slow line.

A supplier owes me a credit and I also owe him for two old bills. Can I just net them?

Yes, and you should, but net them in writing. Write both as separate lines against him, then let the next bill show the sum: bills owed less the credit equals what you actually pay. Netting in your head is how one side gets forgotten.

Is it rude to ask for cash instead of a credit?

Not if you say why in one sentence. "This is a big amount for my shop and I would rather settle it in cash" is a normal thing to say. The boy may need to ask his office, and he may come back with half in cash. That is still better than Rs 6,000 of goods you did not choose.