Guides · Bookkeeping
Outstanding vs advance
Outstanding and advance are two ways money sits between a business and another party. An outstanding is a supply made but not yet paid; an advance is money paid before the supply. They point in opposite directions.
Two directions of the same relationship
An outstanding amount is a debt: goods or services were supplied and the payment has not come. An advance is the reverse: money changed hands before the supply, so it is a credit waiting to be worked off. With the same party you can have both at once.
Reading a party's position means netting the two — what they owe you against what you owe them, or hold from them.
Why the true balance needs both
Look only at outstandings and you might chase a customer who has already paid you an advance that offsets the bill. Look only at advances and you might forget a supply that has since been delivered and is now due.
The real balance with a party is the two together, which is why a good ledger keeps both against the same name.
How Lekha nets a party's position
Lekha records receipts and advances against the buyer or supplier and the bills they relate to, so a party's outstanding and any advance sit against the same name and net to a true balance.
Lekha records what your documents say and tracks the money on both sides — what you owe and what you are owed. It records and tracks; it does not replace your accountant.
Questions
- What is the difference between an outstanding and an advance?
- An outstanding is money still owed on a supply already made; an advance is money paid before the supply. They point in opposite directions.
- Can I have both an outstanding and an advance with one party?
- Yes. The true balance with that party is the two netted — what they owe you against what you owe or hold from them.
- Why track advances alongside outstandings?
- So you do not chase a customer who has already paid an advance, or forget a supply that has since been delivered against one.