Payment

Because an obligation that is never discharged is just a number in a ledger, and the business needs to know which of its claims have turned into money.

Payment is where a receivable becomes cash and the commercial cycle closes. Everything upstream is a claim; this is the only step that pays wages. Which is why allocation matters more than it looks: unallocated cash makes the receivables ledger untrustworthy, and an untrustworthy ageing report means collections chase the wrong people and stop chasing the right ones.

• A payment must be allocated against something — an invoice, an advance, or an on-account balance. An unallocated payment is an unexplained credit.
• The sum allocated may never exceed the payment amount.
• A payment is a bank or cash fact. It must ultimately reconcile to a statement line, or one of the two records is wrong.

Payments land on the account rather than the invoice, usually because whoever posts them cannot tell which invoice a remittance covers. The balance is right and the detail is wrong — so the total agrees with the bank while every line in the ageing report is fiction, and nobody notices until a customer disputes a reminder for something they paid months ago.

• Part payment against several invoices, where allocation order changes which invoices show as overdue.
• Overpayment, which becomes a credit balance and is a liability until refunded or applied.
• Payment in a currency other than the invoice, where the realised exchange gain or loss belongs to the settlement, not the invoice.
• Bounced or reversed payments, which must reopen the invoice rather than silently reducing cash.
• Payment received by a salesperson in cash and deposited days later — the date the business received it and the date the bank did are different facts.