They paid with a cheque dated in 45 days. Am I richer today?

What you are actually holding

A cheque with a future date on it is a written promise. Somebody is telling you that on a particular day, their bank will have the money and will hand it over. Until that day comes there are three ways this can end: the cheque is paid, the cheque bounces, or the cheque is still in your drawer because nobody has taken it to the bank.

Two of those three are not money. So the piece of paper is worth something, but it is not worth what a banknote of the same amount is worth, and that difference is not a technicality. It is the difference between a shop that can pay its rent on Friday and a shop that cannot.

So what did change when you took it?

Something real did change, and it is worth being precise about what. Before the cheque, your customer owed you for goods. After the cheque, your customer owes you on a cheque — a dated, written, enforceable promise instead of an open account. That is an improvement, and it is why shops accept cheques at all.

What did not change is how much money you have. Your cash on hand is the same figure it was before the customer walked in. Your profit for the month, on the other hand, went up the moment you sold the goods — because profit is about what you sold, and cash is about what you hold. Both statements are true at the same time, and they are not in conflict. They are the reason a shop keeps more than one report.

Three sets of rules, written by different people, agreeing

This is not a preference of this software. Turkish accounting practice gives cheques received their own account, deliberately separate from the till, so that nobody can read them as cash by accident. International reporting standards go further and say plainly that a post-dated cheque is a receivable and never a cash equivalent — on the simple ground that calling it cash records money arriving that has not arrived. Iranian practice carries the same idea under its own name.

Three rulebooks written in different countries and different decades, and on this one question they say the same thing. That is rare enough to be worth knowing, because it means the answer will not change on you when your accountant looks at the books.

The mistake this prevents, in numbers

Suppose you take two cheques in one week: 800 due in twenty days and 1,250 due in forty-five. If the system dropped them into your till the day you received them, two things would go wrong at once.

First, you would read 2,050 of cash you do not have, and you would make decisions with that number — an order placed, a bill paid, a shelf restocked. Second, when the twenty days are up and the 800 really does arrive, it gets counted again. One mistake, two wrong answers: money that was never there, and then the same money twice.

This is exactly why your cash figure and your cheque list are two separate things on two separate screens. Neither of them is the full picture on its own, and that is on purpose.

What you will see on your screens

Record the cheque the way you record any other payment, choosing cheque as the method and filling in the number and the date printed on it. Both of those are required, and both are on the paper in your hand — the shop that wrote it put them there so that everyone can agree later which cheque is which.

• Cash on hand does not move The report that tells you where your money is counts tills and bank accounts. A cheque is in neither, so it is not in that figure.
• The invoice is settled As far as the sale is concerned, the customer has paid. Their statement shows the invoice closed and the cheque outstanding, which is the true position.
• The cheque list shows what you are waiting for Soonest due first, because it is a work queue and not a history. Each row names the document it came from.
• The cash forecast places it on its own date Not today, and not in the week you took it — in the week it can actually be presented.

When the day comes

The cheque list is not only a watch-list. Each cheque on it can be moved on as the paper itself moves on.

When you take a cheque to the bank, mark it Lodge with bank. When the money arrives, mark it Paid in, and the amount moves out of cheques received and into the account it was paid into. When it bounces, mark it Bounced: the amount stays owed to you by that customer and appears on their statement, because a bounced cheque is still a claim you can pursue. And if you hand it to a supplier instead of banking it, mark it Pass on to a supplier — your debt to them falls, but you stay liable if the bank refuses it.

A cheque still in your drawer at the end of a fiscal year is not left behind. When the year's balances are carried into the new year, the cheque moves with them and appears in the new year's list; what happened to it last year stays in last year's books.

What to do about it

Look at the cheque list once a week, on the same day, and look far enough ahead to do something about what you see. A cheque due in nine days is still a problem you can solve; one that was due yesterday is a phone call you should already have made.

Do not spend against a cheque before its date. This is the whole lesson in one sentence, and the reason the rest of the chapter exists: the shops that get into trouble with cheques are almost never the ones that took a bad cheque. They are the ones that spent it early.