A customer pays you ₹50,000 against three open invoices at once. Which bill did they clear? Bill-wise references let you split one receipt across the specific invoices it settles, so outstanding is tracked per bill rather than as one lump against the client. It's Tally's New Ref / Against Ref, built into the payment form.
Allocate one receipt across bills
On Add payment, pick the client and the amount, then the bill-allocation panel lists their open invoices with each one's balance. Type how much of the receipt goes to each; the panel keeps a running allocated and on account total as you go. What you don't allocate stays on account as an advance, ready to apply to a future bill.
Against Ref vs New Ref
Against Ref settles an invoice that already exists, which is the everyday case. New Ref earmarks part of the receipt against a specific invoice as a first-time reference (an advance tied to that bill). Both are bounded by the invoice's outstanding balance; the unallocated remainder is the on-account portion, not a separate line.
Per-bill outstanding, no double-count
An allocation is the detail of the same paid amount, never an extra payment. Each rupee is attributed to at most one invoice (or to on-account), so the per-reference balances reconcile exactly with the receivables ageing on Outstanding, because the same allocated amounts feed each invoice's paid figure. An invoice flips to paid the moment its allocations cover its total.
Over-allocation is impossible
The rules are enforced in the database itself, not just the screen: every allocation must be more than zero, no more than that invoice's outstanding, and the sum can never exceed the receipt. A try to over-allocate is refused at the write, so you can never pay a bill twice or allocate money you didn't receive, whether you do it in the app or over the API. All the arithmetic runs in whole paise, so nothing drifts by a rounding rupee.
Access & control
Owners and assistants record and allocate payments; an invited accountant sees the allocations read-only. Re-allocating a payment means removing an allocation and adding a new one; there is one allocation row per invoice per payment.
Related: Payments received and TDS, Day Book, Cashbook and Outstanding.