Concept
Returned cheques
What happens to a matter's client money when a cheque the bank has not paid comes back, and why a ledger can be quarantined.
Returning the cheque
On the receipt, Return the cheque records a cheque the bank sent back, with the bank's reason and its reference. The receipt is reversed, its money comes off the matter's ledger, and the cheque is no longer counted as uncleared. Reversing a receipt for any other reason closes its cheque in the same way.
If the money was already paid out
Money from a cheque not yet cleared is only paid out when a partner approved drawing on it. If that cheque comes back, the ledger falls below nought: the firm has paid out money it never received.
The return is not refused; the bank has already refused the cheque. Instead:
- The matter's ledger is quarantined in the same step, from that day. Nothing more leaves it.
- The matter's responsible partner and everyone who may lift a quarantine are told at once, not in a digest.
- The quarantine and its figures are kept on the audit trail.
Making it good
Put office money into the matter's client ledger to cover the shortfall, then choose Lift the quarantine on the ledger's row in Finance, Client account, Funds held, as described in The client account.
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- Uncleared moneyMoney in from a cheque is held on the matter at once but may not be paid out until the cheque clears, so one client's money never pays out on another's.
- Drawing on uncleared moneyWhen a payment cannot wait for a cheque to clear, the requester gives the reason and a partner who may override approves it; every such payment is kept on the overrides register.
- Receipts and applying money to billsRecord money received into the office or client account, apply it to bills with any tax the client withheld, bank and return cheques, issue the receipt and keep withholding certificates.
- The client account and its ledgersWhat the firm holds for each matter in each currency, the statement a client reads, the funds held with the control figures, dormant money, quarantine and refused overdraws.