A contractor pays by cheque

What does this tour show?

It shows the afternoon side of trade credit. At two o'clock a cheque arrives from the builder who has been buying on account all month. Before banking it, Nuwan wants to know two things: which invoice does it pay, and what will still be owed afterwards? The tour opens the builder's account, reads the statement and records the cheque against the right invoice, all in three screens.

Cheques are still a normal way for contractors to settle accounts. They are also easy to lose track of: a cheque goes in the drawer, the invoice stays "unpaid" in the book, and a month later someone rings the customer to chase money they already paid. Recording the cheque the day it arrives, against a named invoice, stops that.

What does the account look like?

The account card shows what the builder owes now, their credit limit, the credit in hand (what they can still buy on account) and their usual discount. The statement next to it lists every invoice and payment with a running balance. These are the sample figures:

With a credit limit of Rs 150,000, the builder has Rs 42,650 of credit in hand before today's cheque. The oldest unpaid invoice is INV-0981 for Rs 48,600, from early September.

Step by step

1. Open the trade customer. Trade customers live under your customers list (shown as B2B partners). Search by name and open the account.
2. Read Owed now and the credit limit together. Rs 107,350 owed against Rs 150,000 tells you this builder is using most of their credit. That is useful context before you speak to them.
3. Note the credit in hand. It is the room left to buy on account. If it is small, the next big order at the till may be stopped, so it is worth mentioning when the builder is in.
4. Read the statement from the top. Each line is an invoice or a payment, with a running balance from the opening balance to the closing one. You can see at a glance that the 15 September cheque cleared the opening balance and that INV-0981 is now the oldest debt.
5. Choose Record payment. A panel opens on the right with Amount, Method, Reference and Allocate to.
6. Enter the amount from the cheque. In the tour the cheque is for the full Rs 48,600. Type exactly what is written, not what you expected.
7. Choose the method, Cheque. Other methods include cash, card and bank transfer. Keeping the method right matters when you reconcile the bank later.
8. Type the cheque number as the reference. This is what you will look for if the cheque is ever returned or queried.
9. Allocate it to the invoice it pays. Pick INV-0981. The panel shows it as paid in full. Save, and the balance falls to Rs 58,750 while the statement gains a new payment line.

Why does allocation matter?

A payment that simply lowers the balance leaves the question "which invoice?" open. When the customer's office says "we paid the September invoice", you want your record to agree in writing. Allocating also keeps the ageing honest: once INV-0981 is marked paid, the oldest unpaid invoice is INV-1027 from late September, and that is the one to follow up next. The customer credit guide explains ageing and why the oldest invoice is usually the one to chase.

What if one cheque pays several invoices?

It happens often at month end. A contractor's office writes one cheque for everything due and sends a list. In that case, allocate the single payment across each invoice it covers, oldest first, so each one is marked paid in full or part paid. If the cheque is for Rs 84,500, for example, it would clear INV-0981 (Rs 48,600) and INV-1027 (Rs 35,900) exactly, leaving only the October invoice open. If the amount does not divide neatly, allocate what it covers in full and leave the remainder against the next invoice, then tell the customer what is still owed on it. A short phone call the same day saves a long one at the end of the month.

Tips for running trade accounts

• Record cheques the day they arrive, before they go in the banking envelope.
• If the cheque does not match any single invoice, allocate to the oldest first and tell the customer what is left on each.
• Ask contractors to write the invoice number on the back of the cheque or the remittance slip. It removes the guesswork.
• Look at the statement before ringing a customer about money. Arguments usually come from two different versions of the same list.
• Review credit limits now and then. A builder who always pays on time may deserve a higher limit; one who is always late may need a lower one.

Common mistakes

• Recording the payment as cash because it was "money in". The method matters for your banking and for spotting returned cheques.
• Leaving the reference blank. A cheque number is the only thing that links the record to the piece of paper.
• Allocating to the newest invoice. The customer usually means to pay the oldest; allocating otherwise makes the account look more overdue than it is.
• Not checking credit in hand. You find out at the till, in front of the customer, instead of on a quiet afternoon.
• Keeping a separate paper book "just in case". Two records drift apart, and the wrong one gets trusted.

What should you do next?

With the cheque recorded, the day's money is nearly complete. The last tour in the paint day, how the day went, shows the Home page at closing: sales, profit, how customers paid (including on account) and which mixes are still waiting. If trade debts are tying up your cash, read cash flow for small business and how to get invoices paid faster.

How EasyTaskr helps

EasyTaskr keeps each trade customer's balance, credit limit and usual discount on their account, with a statement that shows every invoice and payment and a running balance. Payments are recorded by method with a reference and allocated to the invoice they pay, so the balance and statement update together.