Money promised is not money received

On 14 October a cloth customer tells you he will send ₹2,000 as an advance against an order of ₹18,000. You write ₹2,000 in the credit column that evening, because that is the evening you heard it. The money reaches you on 23 October. For nine days the book claimed ₹2,000 you did not have.

You do not count the cash box every evening. Nobody does in a week like that one. On the 20th you counted it to pay the tempo and it was ₹2,000 light, and six days of entries gave you no reason why.

The mistake is mechanical: the entry carries the date of the promise instead of the date of the movement. Do it four times in a month and there is a day, usually the day a bill falls due, when the book shows ₹8,000 you cannot put your hand on.

Keep two sides and most of this disappears. The customer's account says what he owes you; the cash side says what has actually come in. A ₹20,000 udhaar sale belongs in his account in full on the day the cloth left the shop, whether he has paid a rupee of it or not. That is what the khata is for. What must never happen is that ₹20,000 showing up on the cash side before the money does.

On paper the expected side is the right-hand page, or a second column. In a spreadsheet it is four columns, date, name, amount and status, and the figure you trust is =SUMIF(D2:D500,"received",C2:C500), with the forecast in a second cell so nothing can add the two by accident. Make the status a dropdown: SUMIF will not match "Received" against "received", and one capital letter silently drops a row out of your total. In Khatamel it is a pending entry, recorded on 14 October and marked pending, listed with everything else while the balance leaves it out. On the 23rd you mark it done and date it the 23rd.

One cash total, and only movements go into it.

A ₹45,000 cheque handed to you on Friday the 2nd is paper until it clears. You deposit it on Saturday the 3rd and the bank credits you on Tuesday the 6th; a local cheque normally clears the next working day, so that gap is a weekend. Or it comes back on the 7th, and now you have a difficult phone call and a ₹45,000 hole where you thought money was sitting. Record it as expected on the 2nd, with the cheque number in the note, and move it across on the day your bank credits it. A post-dated cheque is the same trap with a longer fuse: a cheque dated the 25th is not money on the 2nd, and plenty of people enter it the day it reaches the drawer. Keep that one expected too, and move it when the bank credits it: not the day it was handed over, and not the date on its face.

Part-payments are where shop-front accounts go wrong. A customer with a ₹20,000 month-end account pays ₹7,000 on the 30th and says the rest after Diwali. The ₹20,000 stays in his account, because he owes all of it. On the cash side you have ₹7,000 received, dated the 30th, and ₹13,000 still expected. "After Diwali" is not a date, so turn it into one before he leaves the counter. Do not let the ₹13,000 sit in the same total as the ₹7,000 with the difference explained in a note; six weeks later the total is the only thing anybody reads.

Three month-end accounts owe you ₹60,000 between them, and all three have said they will pay in the first week of November. On the 2nd you order ₹55,000 of stock on 15-day terms, because the book shows ₹60,000 coming. The fortnight's takings go where they always go, rent, two wages, the electricity bill; the supplier's ₹55,000 was always coming out of those three accounts. Two of the three pay. ₹38,000 between them. On the 17th you are ₹17,000 short on a bill that will not wait, so you borrow it at whatever your hand loan costs, say 2 per cent a month, or you pay late and your supplier quietly shortens your terms next season.

That ₹17,000 was never there.

A purchase is decided against money that has moved. The expected column is a forecast, and you discount it person by person. Write the gap beside every promise once it is paid: promised the 5th, paid the 12th, seven days. After three or four months every name carries its own number. Rameshbhai nil, Suresh seven, Mehta twenty-five days and two visits to his shop. Plan the money to land on the promised date plus that man's number, and for Mehta plan on nothing until the second visit.

A twenty-member committee at ₹5,000 a head is ₹1 lakh due on the 5th, and the payout goes out on the 6th. Credit all twenty on the day each man promised and the collection reads complete. Two are late, ₹90,000 came in, and the organiser funds ₹10,000 of somebody else's payout himself. The payout was a movement. Two of those instalments were not.

₹1.4 lakh received this month, ₹46,000 expected, and ₹22,000 of that expected already past the date it was promised. The third is what tells you whether to order this week. One is a fact; the other two are opinions about people. A single blended ₹1.86 lakh is not a lie, it is just not spendable.

UPI has made one part of this worse. The customer turns his phone round and shows you a success screen, and that screen is his, not yours. The entry waits for your own bank's message, and takes its date from that. A transfer sitting at "processing" can reverse at nine in the evening, and a screenshot can belong to last Tuesday.

Four things, every time.

• Who: the person, not "the cloth party".
• How much: the figure he said, not the figure you hope for.
• Against what: this order, that invoice, October's instalment.
• By when: the date he himself named.

Ask for the date while the person is still standing in front of you; that is a far easier question than the phone call on the 20th. If he refuses to give one, write "no date given" and treat the amount as zero when you are planning.

Read that column once a week, on the morning before you place orders, whatever day your wholesaler delivers. Keep it the same morning every week. Anything past its date gets a call that day, while the promise is still fresh in both memories.

Tag these lines with a label of your own: advance, cheque, udhaar. On paper a tag has to be a place: keep the expected lines on a page of their own, or mark the margin, a circle for a cheque and a tick for an advance, so a week of them reads down one edge. In a spreadsheet it is a column you filter.

If several people write in the same book, decide who may change an entry at all, because changing a pending line to a received one is what puts the amount into the total. In Khatamel that sits inside the owner's per-member permissions: who may add a credit, a debit or a withdraw, and who may edit or delete an entry. Every entry records who added it and when, so an edit or a deletion is visible afterwards. On paper it means the received column is in one person's handwriting and nobody else's.

Do this for two months and you will know which three names to stop counting on before you place an order. The month may still go badly. You will know that on the 2nd instead of the 17th.