The $2M Reconciliation Error That Changed How We Think About Cash

The $2M Error

Last year, a family office called us in a panic.

Their cash forecast showed $4.2M available for a new commitment. They made the commitment. Two weeks later, they realized they only had$2.1M.

What happened?

A capital call for $2.1M had been recorded against the fund — but nobody created the matching cash outflow. The fund ledger was correct. The cash ledger was wrong. The forecast was wrong.

One missed entry. One cascading error. One very uncomfortable LP call.

This is surprisingly common. In our conversations with portfolio managers:

• 67% manually duplicate transactions across fund and cash ledgers
• 42% have discovered reconciliation errors after making commitments
• 23% have experienced a "significant" cash forecasting miss (>$500K)

The problem isn't carelessness. It's the fundamental architecture of double-entry across systems.

The Root Cause: Double Entry, Double Risk

Here's how most systems handle a capital call:

Step 1: Record the capital call (fund ledger)

Fund: Sequoia Fund VII
Type: CAPITAL_CALL
Amount: $500,000
Date: 2025-03-15

Step 2: Record the cash outflow (cash ledger)

Account: Operating Cash
Type: OUTFLOW
Amount: $500,000
Date: 2025-03-15
Reference: "Sequoia capital call"

The problem: These are two separate actions. If you do Step 1 but forget Step 2:

• Fund shows $500K called (correct)
• Cash shows $500K available (wrong)
• Forecast shows $500K more than reality

Now multiply by 40 funds, 4 capital calls per year each, across 3 team members.

Something will slip. It always does.

The Solution: Automatic Cash Routing

Today we're launching Cash Routing — a feature that automatically creates paired transactions.

One entry. Two ledgers. Zero errors.

When you record a capital call, the system automatically creates the matching cash outflow. When you record a distribution, it creates the matching cash inflow.

No manual duplication. No reconciliation. No risk.

How It Works

You enter:

Fund: Sequoia Fund VII
Type: CAPITAL_CALL
Amount: $500,000
Date: 2025-03-15

System automatically creates:

Transaction 1 (Fund Ledger):

Fund: Sequoia Fund VII
Type: CAPITAL_CALL
Amount: $500,000
Direction: OUTFLOW (from your commitment)

Transaction 2 (Cash Ledger):

Fund: Sequoia Fund VII
Type: DISTRIBUTION
Amount: $500,000
Direction: OUTFLOW (from your cash)
Transfer ID: linked to Transaction 1

Both transactions share a transferId — they're permanently linked. Edit one, the other updates. Delete one, both delete.

The Pairing Logic

Why these pairings?

• Capital call to fund = Cash flowing OUT of your account TO the fund
• Distribution from fund = Cash flowing INTO your account FROM the fund

The paired transaction represents the other side of the same cash movement.

Configuration

Cash routing can be configured at two levels:

Tenant-Wide Default

Set a default cash routing fund for your entire organization:

Settings → Cash Routing

Default Cash Fund: "Operating Cash Account"
Status: Enabled

All capital calls/distributions will pair with this fund.

Fund-Level Override

Override for specific funds:

Fund: Sequoia Fund VII → Edit

Cash Routing:
  ☑ Enable cash routing for this fund
  Paired Fund: "Sequoia Dedicated Cash"

This is useful when:

• Different funds have different bank accounts
• You want to route GP distributions to a specific cash pool
• Some funds shouldn't have automatic pairing (e.g., internal transfers)

Works with Projections

Cash routing isn't just for actual transactions. It works with projections too.

When you create a projected capital call:

Type: CAPITAL_CALL
Data Source: PROJECTION
Fund: Sequoia Fund VII
Amount: $500,000
Date: 2025-06-15 (projected)

System creates paired projection:

Type: DISTRIBUTION
Data Source: PROJECTION
Fund: Operating Cash
Amount: $500,000
Date: 2025-06-15 (projected)
Transfer ID: linked

Your cash forecast now automatically includes:

• Projected capital calls as cash outflows
• Projected distributions as cash inflows

No manual forecasting. No spreadsheet formulas. Just accurate projections.

Multi-Currency Handling

Cash routing respects multi-currency setups:

Scenario: EUR-denominated fund, USD operating account

You enter:

Fund: European Growth Fund III
Type: CAPITAL_CALL
Amount: €500,000
Date: 2025-03-15

System creates paired transaction:

Fund: Operating Cash (USD)
Type: DISTRIBUTION
Amount: $542,500 (converted at spot rate)
Date: 2025-03-15
FX Rate: 1.085
Source Currency: EUR

The paired transaction is converted using the FX rate on the transaction date.

Before vs After

Before: Manual Double-Entry

Recording a capital call:

1. Navigate to fund, enter capital call (2 min)
2. Navigate to cash account, enter matching outflow (2 min)
3. Remember to use same date, amount, reference (mental overhead)
4. End of month: Reconcile fund vs cash ledgers (30 min)
5. Find 3 discrepancies, investigate each (45 min)
6. Fix errors, re-run reports (20 min)

Total time: 99 minutes Error rate: 3-5% of transactions have mismatches

After: Automatic Cash Routing

Recording a capital call:

1. Navigate to fund, enter capital call (2 min)
2. Done.

Total time: 2 minutes Error rate: 0% (transactions are linked by design)

Monthly reconciliation: Not needed — ledgers are always in sync

Real-World Impact

Case Study: Multi-Family Office

Before Cash Routing:

• 2 hours/week on transaction reconciliation
• Average 4 mismatches per month
• Cash forecast accuracy: 87%
• One "significant" forecasting miss per quarter

After Cash Routing:

• 0 hours/week on reconciliation (automatic)
• 0 mismatches per month
• Cash forecast accuracy: 99%+
• Zero forecasting misses in 6 months

Annual savings: 104 hours of analyst time + avoided commitment errors

What Operations Teams Are Saying

"We used to dread month-end reconciliation. Now it takes 5 minutes because there's nothing to reconcile." — Operations Manager, $1.2B Family Office

"The projection pairing is a game-changer. Our cash forecast updates automatically when we add projected capital calls. No more formula hunting in Excel." — CFO, Single Family Office

"We caught our first potential error immediately — the system flagged that we were trying to delete a paired transaction. Saved us from creating a mismatch." — Analyst, Fund of Funds

Getting Started

Step 1: Set Up Default Cash Fund

Navigate to Settings → Cash Routing

Select your primary cash/operating account as the default pairing fund.

Step 2: Enable for Existing Funds (Optional)

For funds that should route to different cash accounts:

1. Go to Fund Detail → Settings
2. Enable "Cash Routing"
3. Select the appropriate paired fund

Step 3: Create Transactions Normally

No workflow change required. Just create capital calls and distributions as usual.

The paired transactions appear automatically.

API Access

Cash routing works via API too:

// Create capital call with automatic pairing
POST /api/v1/funds/{fundId}/transactions
{
  "type": "CAPITAL_CALL",
  "amount": 500000,
  "transactionDate": "2025-03-15",
  "dataSource": "ACTUAL"
}

// Response includes both transactions
{
  "primaryTransaction": { ... },
  "pairedTransaction": {
    "type": "DISTRIBUTION",
    "amount": 500000,
    "fundId": "cash-fund-id",
    "transferId": "shared-transfer-id"
  }
}

Full documentation: Cash Routing Guide

What's Next

January 2026

• Bulk pairing for existing transactions
• Pairing templates for complex scenarios
• Audit trail enhancements

Q2 2026

• Custom pairing rules (if X then Y)
• Multi-leg transactions (fund → cash → fund)
• Integration with external accounting systems

Pricing

Cash Routing is included in all paid plans:

• Boutique: Single default cash fund
• Institutional: Unlimited fund-level overrides
• Sovereign: Custom pairing rules + audit compliance

Never Miss a Cash Movement Again

Ready to eliminate reconciliation errors?

Enable Cash Routing — it takes 2 minutes to set up.

Questions? Email hello@nagarehq.com

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Related:

• Cash Routing Documentation
• Multi-Currency Handling Guide
• Transactions Guide