Contractor Credit and Khata in a Hardware Shop in Nepal

In Nepal, hardware shops extend credit to contractors, masons and regular builders as a matter of course. The aim is not to stop it but to run it with limits, written records and a regular rhythm of statements and follow-up. A shop that does this keeps its customers and its cash flow. A shop that does not ends up with a thick notebook of disputed balances.

Why credit is normal and why it hurts

Contractors are paid in stages by their own clients, so they pay suppliers when funds arrive. A hardware shop that refuses credit loses their business to one that does not. But every day of credit is money you could have used to buy stock or pay your own suppliers. If dues grow faster than sales, the shop borrows to fund its customers.

Step 1: Open an account properly

Before giving credit, record:

• Full name, business name and phone number.
• Address and the sites where material will go.
• PAN if they are a registered business.
• Name of a reference or a guarantor if your policy requires one.
• Agreed credit limit and payment terms, for example weekly, monthly or on stage payment.

Write the terms down and ask the customer to acknowledge them. This is not about distrust; it removes ambiguity later.

Step 2: Set sensible limits

A limit is the largest outstanding balance you accept. Decide it from the customer's history and your own capacity, not from their request. Review it every few months. Customers who pay on time can get a higher limit; those who delay do not.

Step 3: Use one ledger per customer, with sites

A contractor may run several sites at once and pay for one before another. Record each bill against the customer and, where useful, against the site. Then you can answer, "How much is outstanding for the Bhaktapur site?" without scanning pages.

Ledger line	What it shows
Bill number and date	What was sold and when
Site or project	Where it went
Debit amount	What the customer owes for that bill
Receipt and mode	What was paid, in cash, cheque or bank transfer
Running balance	What is outstanding now

Step 4: Make every delivery provable

Many disputes start with "I never received that". For credit orders, use a delivery note with quantity, date, vehicle and the signature or phone confirmation of someone at the site. Keep a photo or a signed copy. This works as proof if the amount is challenged later.

Step 5: Send statements regularly

At least monthly, send each credit customer a statement listing bills, receipts and balance. Many shops send it by WhatsApp as a PDF or image. Ask the customer to confirm the balance. If they raise an issue, you can resolve it while the details are still fresh, not after six months.

Step 6: Follow up politely and on schedule

1. A reminder a few days before the due date.
2. A message on the due date with the amount.
3. A phone call a week later if unpaid.
4. A visit or a meeting for larger balances.
5. A pause on new credit until a payment arrives, if your policy says so.

Keep a record of each contact. Tone matters: these are customers you want to keep.

Step 7: Record cheques and part payments carefully

If a customer pays by cheque, record the cheque number, bank and date. If the cheque bounces, reverse the receipt and note the reason. Part payments should be allocated to specific bills if the customer asks, or to the oldest bill by default; decide your rule and apply it consistently.

What to do when a customer disputes a balance

Disputes are a fact of credit trade. The best response is calm and document-based. Print the ledger, list each bill with its date and delivery note, and go through it line by line with the customer, in person if possible. Most disputes turn out to be a missing receipt, a bill for a different site or a return that was not credited. Fix the error, record the correction as a new entry with a note and avoid altering old entries.

If the customer disagrees with a delivery, ask who received it, check the signed note and the vehicle record and, if needed, speak to the driver. Keep the tone respectful. The relationship usually matters more than the argument, and a clear paper trail lets you be firm without being hostile.

When a customer stops answering calls, move to the escalation steps you have written into your policy, and take advice before using any formal route.

Legal and record points

For large unpaid balances, signed delivery notes, statements and written terms are the evidence you would need. Speak with a lawyer about how to approach recovery in your situation. This article is about record keeping, not legal advice.

Common mistakes

• Giving credit with no limit.
• Recording sales in a notebook and receipts on a loose slip.
• Not sending statements, so balances are discovered during a dispute.
• Letting different staff give different terms to the same customer.
• Continuing to supply a customer with an old unpaid balance because it is awkward to refuse.

How software helps

A system with customer ledgers can enforce limits, group bills by site, print statements and list overdue customers. WebsNP Hardware Shop Software does this and can send reminders by message once a gateway is configured for you. For projects with many stages and subcontractors, see construction management software.

Next step

List your ten largest balances and mark which have a signed delivery record and a recent statement. Fix the weakest first. When you want to see ledgers, limits and statements in action, message WebsNP on WhatsApp at +977 9846280400 and ask for a demo.

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