Udhaar keeps customers loyal. It also quietly eats your working capital. A shop with ₹3 lakh of sales a month and an average of 45 days of udhaar has roughly ₹4.5 lakh sitting with customers at any time, money that could be stock on your shelves.
The goal is not to stop giving credit. It is to give it deliberately and collect it on time.
Decide your credit policy before the customer asks
Write down three numbers and stick to them:
- Credit period. How many days before you expect payment, for example 15 or 30 days.
- Credit limit per customer. A maximum outstanding balance. A new customer might start at ₹2,000; a regular for five years might get ₹25,000.
- Stop rule. The point at which you stop giving more credit, for example when anything is older than 60 days.
A policy decided in advance turns an awkward personal refusal into a simple rule: "Bhai, my system will not allow more udhaar until the old one is cleared."
Record it the moment it happens
The single biggest cause of udhaar disputes is a missing or vague entry. Every credit sale should have:
- The amount and date.
- What was given, or the bill number.
- Ideally, a confirmation the customer can see, such as a WhatsApp message.
The digital khata records the date automatically and lets you share an entry or statement instantly.
Reminders that get paid
Most customers mean to pay. They forget, or they pay whoever reminds them first. A simple escalation ladder:
| When | Message tone | Example |
|---|---|---|
| On the due date | Friendly | "Namaste, your balance is ₹4,200. Please pay when convenient. UPI: shop@upi" |
| 7 days late | Clear | "Reminder: ₹4,200 was due on 5 March. Please clear it this week." |
| 21 days late | Firm | "₹4,200 is now three weeks overdue. New credit is on hold until it is cleared." |
| 45+ days late | Personal visit or call | Agree a written payment plan |
Two habits make reminders far more effective: include the exact amount, and include a way to pay right now, such as your UPI ID or a QR code.
Track ageing, not just the total
A balance of ₹50,000 can be perfectly healthy or a serious problem. The difference is age. Split what customers owe into buckets:
- 0 to 30 days: normal trade credit.
- 31 to 60 days: needs reminders.
- 61 to 90 days: stop new credit.
- Over 90 days: at real risk of never being paid.
The Reports tab in our khata shows this ageing automatically, by matching each payment against the oldest unpaid udhaar first.
Should you charge interest on late udhaar?
Many traders in India charge interest (byaj) on long-overdue balances, usually quoted as rupees per hundred per month. ₹1.5 per hundred per month is 18% a year. You can work out any amount with our interest calculator.
Interest only works if the customer agreed to it in advance. Put it on the bill or in your written terms. In practice, a small discount for early payment often works better than a penalty for late payment.
If you sell to businesses: know the 45-day rule
If your business is a micro or small enterprise registered on the Udyam portal, the law gives you extra protection when you sell to other businesses:
- Under the MSMED Act, a buyer must pay a micro or small supplier within the agreed period, and that period cannot exceed 45 days. Without a written agreement, the limit is 15 days.
- If the buyer pays late, compound interest at three times the RBI bank rate becomes payable, and you can file a case on the government's MSME Samadhaan portal.
- Under section 43B(h) of the income-tax law, a buyer may not get a tax deduction for the expense until it actually pays you, which gives buyers a strong reason to pay on time.
These rules apply to registered micro and small enterprises supplying goods or services to other businesses. They do not cover retail sales to households. Our guide to Udyam registration explains how to register for free.
Recovering very old dues
For balances older than six months:
- Send a full statement so the customer sees every entry.
- Offer a settlement plan in instalments rather than asking for everything at once.
- Get any agreement in writing, even a WhatsApp message.
- For large business dues, a legal notice drafted by a lawyer often prompts payment.
- Accept that a small part may never be recovered, and write it off in your books at year end instead of carrying it forever.
Common questions
How much udhaar is too much?
Watch two numbers: total udhaar as a share of monthly sales, and the share older than 60 days. If customers owe you more than about one month of sales, or more than a fifth of it is over 60 days old, tighten your credit limits.
Is it legal to send payment reminders on WhatsApp?
Yes, polite reminders to a customer who owes you money are normal. Avoid threatening language, sharing the customer's details with others, or messaging at unreasonable hours.
This guide is general information to help you understand the topic. It is not legal, tax or financial advice. Rules and rates change; confirm details for your situation with a qualified professional or the official government portal. Read our editorial policy.