When recording a payment in Tally, the payment date will be the date that appears against the transaction in the bank area including on your reconciliations. For most payments this is fine, although it can cause issues when dealing with cheques. This is because you or your suppliers might not immediately cash the cheque, or there might be a clearing period between you depositing it and the funds showing on your statement. To solve this, we advise creating a clearing account. All cheque payments can be recorded against this account until they are cleared or available on the statement. When they are you can transfer out of this account to the appropriate bank account, meaning your balance is correct and you can reconcile perfectly.
Creating the Clearing Account
To create a cheque clearing account go to Bank > Add a New Bank Account and enter in the following:
- Account Name – call this account ‘Cheque Clearing Account’ or similar
- Starting Date – the starting date should be before the first transaction, i.e. 01/01/1970
- Starting Balance – this should be 0.00
When ready, click Update. Your clearing account has now been created.
Managing Cheque Payments
To record a cheque payment for an invoice do so in the usual way by going to Sales > Selecting the invoice. Use the payment details section at the bottom to assign the payment to the cheque account. The cheque account balance will then be updated with the balance of the payment. You can keep the cheque here until it clears into your actual bank account. When it does you can transfer the money by going to Bank > Transfer Money Between Accounts.
- Date – set the date to the date that the money cleared or is dated on your bank statement
- Amount – this should be the amount that you see on the bank statement
- From – this should be the Cheque Clearing Account
- To – this should be the bank account that the cheque was paid into
- Comment – you can record the invoice number that the payment relates to here
When you’re ready, click Create Transfer. The payment has been recorded, your bank balance is updated accordingly and you can reconcile perfectly.
Unpaid or Bounced Cheques
If a customer pays you by cheque, and then you later find that the cheque bounces, then you will need to somehow reflect this in Tally. To deal with unpaid cheques in Tally you firstly view the invoice by going to Sales > Select the Invoice. The invoice will be marked as paid by cheque to your clearing account.
- To mark the invoice as unpaid due to a bounced cheque, click the refund button at the bottom of the screen
- You will then be taken to the invoice refund page, which lists 3 options. The option you need for an unpaid cheque is the first option; 'Refund the payment received for this invoice'
This will add a negative payment to the existing invoice, making the invoice unpaid. By using the refund button you have a record of exactly what has happened, payment wise, on the invoice.