Payments, and the money you are owed

Recording a payment

When money arrives, open the invoice and use the payment box. ByteBook applies the amount against the invoice, marks it paid or part-paid, and posts an entry that moves money from owed to you into the bank.

Part payments work the same way. Record what actually arrived. If a customer short-pays because of a dispute, the balance stays on the invoice, and the debtors report keeps showing it, which is how the question gets asked.

What the aged debtors list is for

Reports → Outstanding lists what customers owe, grouped by how long it has been owed. It is not a statement about whether the money will arrive. It is a statement about what has been invoiced and not yet paid, and it is the starting point for two different jobs:

• Chasing the money. ByteBook can draft a reminder letter for any unpaid invoice. The text is a starting point; the relationship is yours.
• Judging whether the money is real. A debt that is not going to be paid is not an asset worth its face value.

The second question: will it be paid?

This is where a bookkeeping exercise turns into an accounting judgement. Trade receivables are measured at an amount that reflects the cash the business expects to collect, and for trade receivables the loss allowance is measured at lifetime expected credit losses NZ IFRS 9.5.5.15. In plain words: for money owed by customers, you start from the assumption that some of it will not be paid, and you estimate how much.

The usual approach in a small business is a provision matrix. Group the debtors by age, apply a percentage to each group based on experience, and add the results:

Age	Typical treatment
Current	No allowance, or a very small one
1–30 days past due	A small percentage
31–90 days past due	A larger percentage
Over 90 days	A large percentage, or the whole amount
Identified as bad	The whole amount

Two things make this a professional judgement rather than arithmetic. The percentages have to come from somewhere — the business's own history, or industry experience — and a specific debt known to be bad is written off in full whatever the age table says.

What the auditor asks next

An auditor does not take the debtors list at face value. The main procedure is external confirmation: asking the customer, directly, whether they agree that they owe the amount ISA (NZ) 505.10. Where the answer raises doubt about its reliability, the auditor has to obtain further evidence to resolve it.

In the simulation, the debtors procedure reports:

• how much is owed and how much of it is late;
• anyone holding a credit balance, which usually means a payment was recorded against the wrong invoice, or was recorded twice;
• whether the ageing is consistent with the invoice dates.

The procedure reports what it found. Whether a 90-day debt will be paid is a question for a person, and ByteBook does not pretend otherwise.

Common mistakes

• Recording a payment against the wrong invoice. The total owed is right and the ageing is wrong, which hides a real problem. Check the invoice number on the remittance.
• Treating a part payment as full settlement. ByteBook keeps the balance open, and that is correct.
• Writing off a debt by deleting the invoice. ByteBook will not let you delete it, and that is also correct: the record of the sale and the record of the loss are both part of the history. Void the invoice, or post the write-off as an expense, and the trail stays readable.
• Leaving the allowance at last year's percentage without looking. The estimate is meant to describe this year's debts.