Managing Credit Sales at Your Pharmacy — How to Avoid Bad Debt
Credit sales (udhar) are a reality at most Indian pharmacies — particularly for chronic patients, local households, and institutional customers like clinics or nursing homes. Managed well, credit builds loyalty and increases volume. Managed poorly, it creates cash flow problems, bad debt, and strained relationships. Here's how to do it right.
When to Offer Credit — and When Not To
| Customer Type | Credit Risk | Recommendation |
|---|---|---|
| Long-term chronic patient (known address, phone) | Low | Offer credit with monthly limit |
| Local clinic / doctor with prescription volume | Low-Medium | Offer 30-day credit with invoice |
| New walk-in customer | High | Cash or UPI only until trust established |
| Construction workers / daily wage | High | Avoid credit — income is irregular |
| Corporate clients / hospitals | Medium (but slow to pay) | Formal credit with signed agreement |
The Right Way to Track Credit Sales
The biggest mistake is tracking udhar in a notebook or on memory. This leads to disputes, forgotten dues, and inability to recover. A systematic approach:
- Customer credit ledger: Every credit sale recorded with date, items, amount, and due date — per customer
- Credit limit: Set a maximum outstanding balance per customer (e.g., ₹2,000 for households, ₹20,000 for clinics)
- Due date: Every credit sale has an explicit due date — ideally on the 1st or 15th of the month for household customers
- SMS reminder: Send a WhatsApp message 3 days before due date: "Outstanding: ₹X due on [date]"
Rule: Do not extend new credit to a customer who hasn't cleared their previous outstanding. This one rule eliminates most bad debt.
How to Recover Dues Without Damaging Relationships
- Friendly reminder (3 days before due): "Just a reminder — your balance of ₹X is due on [date]."
- Due date follow-up: Call or message on the due date if not paid. Most customers respond at this stage.
- One week overdue: Visit in person if nearby, or call with a request to pay partial amount.
- Two weeks overdue: Stop extending new credit until cleared. Inform politely but firmly.
- One month overdue: Escalate — ask for a commitment date, or involve a family member if a regular customer.
Write-off threshold: If a balance is over 90 days old and all recovery attempts have failed, write it off. Do not keep chasing it indefinitely — the time cost exceeds the amount. Learn from it and tighten your credit policy for future.
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