How to run a customer khata you can actually collect
Selling on khata keeps regulars coming back and quietly ties up cash. How to record credit sales, age each balance, set limits, and why khata never delays GST.
For shops, distributors and anyone who sells to regulars on credit · 3 min read · updated
In short
- A khata is an accounts receivable ledger: money owed to you but not yet in your hands.
- Record credit sales at the counter as they happen, against one running balance per customer.
- Age balances into 0–30, 31–60, 61–90 and 90+ days, and act differently at each stage.
- Give each customer a credit limit and make it visible at the counter.
- GST on a khata sale is due in the month of the invoice, before the customer pays.
- GST gives no bad-debt relief; a credit note cannot be issued just to write a balance off.
What a khata really is
A khata — the running udhaar account a shop keeps for a regular customer — is an accounts receivable ledger by another name. Every credit sale adds to what the customer owes, every payment reduces it, and the balance is money that is yours but not in your hands.
That last part is the whole problem. A shop can be profitable on paper and short of cash in the drawer, because a growing share of its sales is sitting in khata balances that nobody is collecting with any system.
Record it at the counter, not at night
Write the credit sale down as it happens, against the customer, with what was bought. A khata rebuilt from memory at closing time is the one a customer disputes, and a customer who disputes one entry starts disputing all of them.
Keep one balance per customer, not a notebook of separate entries. What they owe should be a single figure you can read out in a second, and every payment should reduce that figure rather than sit on a separate page.
Age the balance, not just the total
How much a customer owes matters less than how long they have owed it. Split each balance by age and act differently at each stage:
- 0–30 days: normal trade credit. Nothing beyond a statement.
- 31–60 days: a reminder, with the amount and the oldest bill it covers.
- 61–90 days: no further credit until the account is brought up to date.
- Over 90 days: the money is at real risk. Call, agree a plan, and decide whether this customer should be on khata at all.
Limits and reminders
Give each khata customer a limit and let the counter see it. The limit is not an insult; it is what stops a good customer's balance creeping to a size neither of you is comfortable raising.
Remind with a message that states the amount and the date it has been owed since. A specific reminder gets paid far more often than a vague request to clear dues — and one sent the way the customer actually reads messages, often WhatsApp, is harder to ignore than a line on the next bill.
Khata does not delay your GST
The mistake that costs most is assuming the tax waits for the money. It does not. For goods, GST falls due on the date of the invoice, so a khata sale carries its tax in the month you made it, and you pay that tax before the customer pays you.
GST gives no relief if the customer never pays. There is no provision for recovering output tax on a bad debt, and a credit note cannot be issued simply to write a balance off. A debt written off in the books can be claimed as an income-tax deduction, but the GST on it is gone.
That is the real price of khata: you finance the customer's purchase and their tax. Set your credit terms knowing it.
Common questions
- Do I pay GST on a sale the customer has not paid for yet?
- Yes. For goods, GST is due on the invoice date, not the payment date, so the tax on a khata sale falls in the month you made the sale.
- Can I claim GST back if a khata customer never pays?
- No. India's GST law has no bad-debt relief, and a credit note may only be issued for reasons such as a return or a price reduction, not to write a debt off. The write-off can be claimed for income tax, but not the GST.
- How should I remind a customer about khata dues?
- With the exact amount, the oldest bill it covers and a statement of the account, sent the way the customer actually reads messages. Specific reminders get paid; vague ones get postponed.