Every installment retailer eventually reaches the same point with a customer: the payments have stopped, the promises have run out, and the goods are still in their house. Somebody has to decide what happens next.
Most shops in Pakistan handle this badly, and not out of malice. They handle it badly because they have no method. The decision gets made in a heated conversation, the customer is told that everything they have paid is forfeit, and the shop ends up in a months-long argument it often loses — in money, in time, or in reputation on a street where every other customer is listening.
This article sets out a repeatable settlement method. It is deliberately restricted to the commercial and bookkeeping side of the decision: valuation, restocking, and what each party is actually owed. It does not cover seizure rights, police involvement or court remedies, which are legal questions for a lawyer and not for a blog.
First: repossession is a calculation, not a verdict
Before anything else, decide whether taking the goods back is the better of your available options. It usually is not.
Compare three paths honestly:
- Restructure the plan. Extend the tenure, lower the monthly, and keep collecting. You keep the full markup eventually, you spend nothing on recovery, and the customer stays a customer. For a customer with genuine, temporary trouble this is almost always the highest-return option.
- Let it run and keep following up. If your cost is already recovered — and on a 12-month plan with a reasonable advance, it typically is by around month 7 — then the remaining balance is profit. Patience is cheap when your capital is already back.
- Repossess and settle. Right when the customer has clearly stopped engaging, the goods still hold meaningful resale value, and your exposure is still large.
The third option costs you transport, staff time, a used unit that is worth less than a new one, and whatever goodwill was left. Choose it because the arithmetic says so, not because you are angry.
The four-step settlement
Once you have decided to take the goods back, work through these four steps in order. The order matters — each step feeds the next, and skipping to the end is how disputes start.
Step 1: Value the returned unit at honest market price
Write down what the unit will realistically fetch in its current condition, today, in your market — not its original price, and not a punitive token figure. Check what comparable used units are actually selling for. Photograph the condition when it arrives.
This number will be challenged by the customer, so it needs to be defensible rather than convenient. A valuation you cannot explain is a valuation you will have to renegotiate.
Step 2: Decide restock or resell
Can the unit go back on your floor as second-hand stock, or does it need to be moved on through a trader? This changes the figure in Step 1 and it changes your cash timing. Record which route you chose, because it determines whether this becomes inventory or a cash sale in your books.
Step 3: Deduct the unearned markup
This is the step almost every shop skips, and it is the one that makes a settlement fair.
Your markup is the price of financing the customer over the full tenure. If they only had the goods for four months of a twelve-month plan, they received four months of that financing — not twelve. Charging them the whole markup for a service they received a third of is exactly the kind of term that collapses the moment it is examined.
Step 4: Compute the net position
Charge the customer for what they actually consumed; credit them for what they actually gave you. Then settle the difference, net of your documented recovery costs.
A worked example
A plan with these terms:
- Your purchase cost: PKR 80,000
- Cash counter price: PKR 100,000
- Installment price: PKR 130,000 (so markup is PKR 30,000)
- Tenure: 12 months · Advance: PKR 26,000 · Monthly installment: PKR 8,667
The customer pays the advance and four installments, then stops. The unit comes back and values at PKR 62,000. Your documented recovery cost is PKR 4,000.
| Line | Working | Amount |
|---|---|---|
| Cash paid by customer | PKR 26,000 advance + 4 × PKR 8,667 | PKR 60,668 |
| Value of returned unit | Step 1 market valuation | PKR 62,000 |
| Total credits to customer | PKR 122,668 | |
| Goods charged at cash price | The customer took delivery of the unit | PKR 100,000 |
| Earned markup | PKR 30,000 × 4 ÷ 12 | PKR 10,000 |
| Total charged to customer | PKR 110,000 | |
| Net balance in customer's favour | PKR 122,668 − PKR 110,000 | PKR 12,668 |
| Less documented recovery cost | −PKR 4,000 | |
| Refund due to customer | PKR 8,668 |
Check your own side of the same settlement
Now look at the identical transaction from behind the counter:
Cash received of PKR 60,668, plus a unit worth PKR 62,000, less the PKR 8,668 refund, less your PKR 80,000 purchase cost, leaves you PKR 34,000 ahead.
And that PKR 34,000 is not arbitrary. It is exactly:
- PKR 20,000 — your normal retail margin on a unit that genuinely was delivered and used, plus
- PKR 10,000 — the markup you actually earned over four months, plus
- PKR 4,000 — your recovery costs, reimbursed.
The framework reconciles. You have earned your trade margin, you have been paid for the financing you provided, your costs are covered, and the customer has been credited for everything they handed over. Nobody has been robbed, which is precisely why this settlement tends to be accepted rather than fought.
What the harsh alternative actually buys you
Suppose you take the common route instead: the customer forfeits everything paid, and you keep the goods. On the same deal you would end up PKR 42,668 ahead rather than PKR 34,000.
So the entire argument is over PKR 8,668. For that amount you take on a customer who believes they were cheated, on a street where your reputation is your marketing, with a real chance of ending up in a dispute whose cost in time alone exceeds the sum involved.
A clear, arithmetic settlement is not generosity. It is the cheaper option, and it is the one you can hand to a staff member to execute without you standing over them.
Record the closure properly
How you close the account matters as much as the settlement itself. A repossession that is recorded as a plain default loses the information you paid for.
Capture at minimum:
- The closure reason, distinguished from a simple write-off or a voluntary early return.
- The valuation used, who set it, and the condition photographs.
- The unearned markup deducted, so the figure can be reproduced months later.
- Whether the unit was restocked, and at what value, so your inventory stays honest.
- The customer's resulting standing — their history should show what happened, not just that something went wrong.
Markaz Flow handles this as a structured four-step settlement with the valuation, restocking choice, unearned markup deduction and net figure recorded against the account, plus a separate controlled write-off path for cases where nothing is recoverable. That matters mostly because it makes the outcome reproducible: in six months, when the customer returns wanting a new plan, you can see exactly how the last one ended and why.
A written policy beats a good instinct
The settlements that go wrong are the ones improvised at the counter. Decide your valuation method, your recovery-cost rate and your unearned-markup rule once, write them into your agreement terms, and then apply them the same way every time.
If you want the whole lifecycle — plan, payments, follow-ups, settlement and closure — held against one customer record instead of a register, start free on Markaz Flow. It is also worth reading our guide to tracking units and preventing default in motorcycle and auto installments, testing settlement scenarios on the free Installment Calculator, or writing the written notice that has to come first with the free payment reminder message generator.