How to reduce bad debt in your shop: 7 strategies that actually work

Every shop has bad debt — credit extended to customers that you will probably never recover. A healthy shop keeps it under 2% of revenue. A struggling shop can run at 10% or more, sometimes without realizing it.

In this guide we share seven strategies to bring bad debt down, ranked from easiest to implement to most demanding. Pick the ones that fit your situation.

What counts as bad debt

Bad debt is any balance that is more than 90 days old, where the customer has either disappeared, denies the debt, or keeps making promises they don't keep. It is different from slow debt (just late) and you should treat it differently.

Strategy 1 — set a clear credit limit per customer

The single most effective intervention. Every customer should have an implicit limit beyond which you ask for a partial payment before extending more credit.

A simple rule: the limit equals two weeks of typical purchase. If a customer normally spends 200 MAD a week, their credit limit is 400 MAD. Above that, ask for a payment first.

Strategy 2 — log every credit, no exceptions

The cheapest way to lose money is to forget that you are owed. Open Konnach the moment you give credit, even if you are busy. Three seconds of logging saves hours of arguing later.

Customers who know you log everything in an app behave differently. They respect the system.

Strategy 3 — send polite WhatsApp reminders weekly

Most merchants reminder once, then give up. Persistence is everything.

The pattern that works:

• Day 7: friendly reminder.
• Day 14: a second reminder, same friendly tone, mention current balance and a soft deadline.
• Day 30: send a clean PDF account summary. Konnach generates it in one tap.
• Day 60: in-person conversation. Calm, no audience.
• Day 90: stop adding more credit. Balance frozen until paid.

This cadence collects 80% of slow debt before it becomes bad debt.

Strategy 4 — offer small early-payment discounts

A 2% discount for paying within seven days costs you almost nothing and accelerates cash flow dramatically. Customers love feeling rewarded.

Don't do this for everyone — pick the customers whose balance is creeping up.

Strategy 5 — refuse credit to repeat offenders

This is the hardest emotionally. But every shop has two or three customers who consistently pay late or not at all.

Keep them as cash customers. Politely.

“Brother, with the new shop policy I can't open new credit until older balances are clean. As soon as we settle that, we restart.”

Most will pay. Some will leave — and those are the ones who would have become bad debt anyway.

Strategy 6 — don't extend credit on luxury items

Necessities (bread, milk) can be on credit because the customer will be back. Luxury items (perfume, electronics, alcohol) should always be cash.

The reason: luxury credits are emotional, often impulsive, and the customer disappears more easily after the purchase.

Strategy 7 — review bad debt monthly

Once a month, open Konnach's Reports screen and identify every balance over 90 days. Decide for each one:

• Recover. Send a final summary, schedule an in-person visit.
• Settle. Negotiate a partial payment, accept a discount in exchange for closing.
• Write off. Mark the balance as closed in your records. Free yourself mentally and stop chasing.

Write-off is not failure. It's hygiene. A clean ledger lets you see the rest of your business clearly.

The 2% rule

Keep total bad debt under 2% of monthly revenue. Above that, your prices are too low or your credit policy is too generous. Below that, you are healthy and can be confident in your shop's survival.

Final word

Bad debt feels personal — these are people you know and trust. But every dirham of bad debt is a dirham you cannot reinvest in stock, in your family or in a better life. The merchants who treat credit as a tool, not a favour, build shops that last.