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Invoices paid for less than billed are marked fully paid, and the unexplained part of the gap is never recovered.
Record every short payment in a register, split the gap into TDS, agreed credit, rejection and unexplained, close only the parts with valid evidence and chase the rest by owner and date.
A register with invoice, billed, received, difference, reason, owner, follow-up date and status, reviewed weekly and escalated after a set age.
Only explained short payments are closed; unexplained balances stay visible until recovered or formally approved for write-off.
Keep a short-payment register. Put one line in it for every invoice paid for less than billed, with the reason, the amount, an owner and a follow-up date. Close the lines that have a valid reason with the right entry. Keep the rest open until the money comes in.
Short payments become leakage when someone receives ₹96,000 against a ₹1,00,000 invoice and marks it paid. The ₹4,000 vanishes into a discount or round-off account, and nobody asks the customer about it.
What columns does the register need?
| Column | What goes in it | Example |
|---|---|---|
| Invoice | Number and date | INV-2214, 5 Sep |
| Billed | Invoice total (₹1,00,000 plus 18 percent GST) | ₹1,18,000 |
| Received | Amount credited in the bank | ₹1,16,000 |
| Difference | Billed less received | ₹2,000 |
| Reason | TDS, agreed discount, rejection or unexplained | TDS at 2 percent on the ₹1,00,000 value before GST |
| Owner | Who will follow up | AR executive |
| Follow-up date | Next check | 20 Oct |
| Status | Open, evidence awaited, closed | Evidence awaited |
If one gap has two reasons, split it into two lines. A ₹14,000 gap made of ₹10,000 TDS and ₹4,000 unexplained is two different jobs.
Which short payments can be closed, and which must stay open?
| Reason | Can it be closed? | Entry and evidence |
|---|---|---|
| TDS deducted | Yes, against a TDS receivable | Tick off when it appears in your tax credit statement (Form 26AS for 1961 Act years, Form 168 under the Income-tax Act 2025) |
| Agreed discount or rate difference | Yes | Issue a credit note; keep the email or contract that agreed it |
| Goods rejected or short-supplied | Yes, once confirmed | Credit note against the rejection note or debit note from the customer |
| Bank charges on a foreign or RTGS receipt | Usually, within a set limit | Bank charges expense, with the bank advice |
| Unexplained | No | Stays open with an owner and follow-up date |
The test is simple: can you show someone a document that explains the gap? If not, it is not closed.
Worked example: 12 invoices, ₹43,500 short
In September a small works contractor, not registered for GST, raised 12 invoices to one company customer, totalling ₹9,40,000. The customer paid ₹8,96,500. The shortfall is ₹43,500.
The accountant splits it:
| Part | Amount | Reason | Action |
|---|---|---|---|
| TDS | ₹18,800 | 2 percent TDS on ₹9,40,000 | Book TDS receivable; check tax credit statement next quarter |
| Credit note | ₹12,000 | Volume discount agreed by sales on 2 Sep | Issue credit note, close |
| Unexplained | ₹12,700 | No remittance note | Email customer with invoice list; follow-up 21 Oct |
Check it: ₹18,800 plus ₹12,000 is ₹30,800. Add ₹12,700 to get ₹43,500. And ₹9,40,000 less ₹43,500 is ₹8,96,500, which matches the bank.
Without the register, all ₹43,500 might have been closed in one entry. With it, ₹12,700 goes to follow-up and the ₹18,800 TDS is tracked until it shows up as a credit.
How often should the register be reviewed, and when is an old balance escalated?
- Weekly: add new short payments from the week’s bank credits.
- Monthly: review every open line with the finance manager.
- Escalation: a typical rule is that lines open beyond 60 days go to the sales owner of the account, and beyond 90 days to the finance head.
- Write-off: only with written approval and within a limit you set in advance.
Keep closed lines in the register. Your auditor may ask why an invoice was closed for less than billed, and the register answers that in one place.
What to read next
Next, read customer says they paid, but the ledger still shows the invoice unpaid. For matching payments to invoices at volume, see the partial payment reconciliation guide and the cash application reference. Short payments are one of the classes in the Seven Classes of Reconciliation Leakage.
TransactIG matches bank receipts to your books and reconciles TDS against the tax credit statement, with an exception queue for gaps like the ₹12,700 above.