Invoicing for Numpties

[Plotloss]

Recently changed business terms.

On large jobs terms are now:

20% with order
60% 14 days before equipment delivery
20% on completion

So I've signed an order for £10K (lets say, to keep it easy)

So for the first invoice for the 20% do I list the total order and then say at the bottom 20% due now 30 days etc or is there another way to do it?

Does VAT complicate things?

I'd call my accountant but I dont have one, yet.

[Eric Mc]

I'd issue three separate invoices at the set time intervals.

Obviously, if you want your customer to have a formal document setting out the terms and conditions for payment, that could be set out in a contract or in a letter agreeing how and when the work is to be carried out (which would constitute a contract).

If you put the full value of the "Sale" on a single invoice, then the VAT man would expect you to account for the VAT arising on the full value of the invoice in the VAT quarter in which this full value invoice was raised. By issuing three separate invoices over the life of the contract, the VAT arising would be deferred into (maybe) two or three VAT Quarters.

If you are Cash Accounting for VAT, it doesn't really matter what you do regarding the invoice as you would only be accounting for the VAT at the point the cash was actually received from the customer.

Edited by Eric Mc on Wednesday 18th April 13:57

[Plotloss]

Thanks for the response Eric, much appreciated.

So would I show on each invoice goods to the approximate value of the 20/60/20 split by cherry picking from the total goods or just have a single invoice line which says 20% of show flat job or similar?

I'm with you on the 3 invoices bit I just dont know how to express that on the invoice, if you see what I mean.

[Eric Mc]

It's up to you to decide what detail and wording to show on a sales invoice - apart from the minimum stautory details -

Business Name
Address
VAT Number
Company Number (if a limited company)
VAT Exclusive Sale Value
VAT Content
VAT Inclusive Sale Value

The rest is embellishment and down to you.


I would show something like

Fees in respect of project XXX - Total agreed Value £10,000)

Stage 1 invoice (20% as agreed) 2,000.00

VAT 350.00

Total Due (Payable 14 days) 2,350.00

Edited by Eric Mc on Wednesday 18th April 14:32

[davidy]

Plotloss

I just put (in the words bit of the invoice):-

Stage Payment 1: 20% with order
Project: xyz
Total Order Value: £xx,xxx

Also reference order no. on invoice

On each invoice you will need to raise VAT and state payment terms required

You will have to raise invoice no. 2 before the 14 day point or perhaps raise a proforma and then issue a 'rea' invoice once you have actually been paid.

Hope that helps

davidy

[Plotloss]

Ahh smart, I knew about the statutory bits but wasnt sure with VAT (only signed up yesterday) whether I had to show detail line items.

Thanks Eric, you've been a star as always

[jeremyc]

Letter or contract setting out payment terms, listed as milestones (or payment events).

Three invoices, each with a line referencing the letter/contract and the specific payment milestone.

e.g. first invoice simply lists "Milestone payment 1 as per agreement xxxx £20,000".

[Eric Mc]

Proformas only complicate matters - and they are really an underhand method of applying the Cash Accounting system on sales, even if you are not formally on that system.

[deva link]

Plotloss said:

60% 14 days before equipment delivery

20% due now 30 days etc

Sorry if I'm misunderstanding how you've written this, but if you're offering 30 day terms and you invoice for 60% 14 days before delivery then you're not likely to get paid until several weeks after you actually deliver.

[justinp1]

Eric Mc said:

Proformas only complicate matters - and they are really an underhand method of applying the Cash Accounting system on sales, even if you are not formally on that system.

Possibly... it might work in the OP's favour...

Ready to get shot down if this is not strictly allowed but:

What about producing a proforma invoice for the total amount. In the payment terms at the bottom you could then put the amounts and dates payments are due - these are taken as deposits towards the final amount.

On delivery of the goods, the 'real' invoice can be sent detailling the amount already received as deposit, asking for the remainder.

That has the benefit of cutting down on one invoice sent and would also better cashflow implications. Similarly, it would be a good idea to send Terms of Business with the proforma and refer to them in it to avoid misunderstandings later.

[justinp1]

deva link said:

Plotloss said:

60% 14 days before equipment delivery

20% due now 30 days etc

Sorry if I'm misunderstanding how you've written this, but if you're offering 30 day terms and you invoice for 60% 14 days before delivery then you're not likely to get paid until several weeks after you actually deliver.

I agree, I think that if possible a rethink might simplify it. If it is not immediately obvious the customer usually always reverts to the way of reading ti which delays payment as much as possible!

[HiRich]

Eric Mc said:

It's up to you to decide what detail and wording to show on a sales invoice - apart from the minimum stautory details -

Business Name
Address
VAT Number
Company Number (if a limited company)
VAT Exclusive Sale Value
VAT Content
VAT Inclusive Sale Value

The rest is embellishment and down to you.

What he said, although confirmation of terms is rather useful.

Having been on both sides, I would also suggest you make it as easy as possible for the Client's Accounts Department to process it, and for the Client in charge of the project to approve it. So, as relevant, I would also generally try to include:
- Name of person who commissioned the work
- Purchase Order numbers
- Your phone number
- A breakdown of costs in line with the Client's budget/cost-monitoring system (e.g 4.2 - print 50,000-off A5 leaflets, £5,000; 5.5 - Bikes & couriers, £75), if necessary with a supporting sheet.
- Any helpful notes (e.g. "This is the second invoice of three expected. See also Inv. No. 100177 issued 27/01/07"
but of course this will depend on the nature & complexity of the job, your relationship with the commissioning Client, and their procedures. Smileys are not recommended.

[justinp1]

HiRich said:

...Smileys are not recommended.

Unless it is the type of invoice which end in:

FAILURE TO SEND PAYMENT BY 20th APRIL 2007 WILL RESULT IN IMMEDIATE LEGAL ACTION WITHOUT FURTHER WARNING

Thank you for your business


I like the personal touch


(joke)

[Plotloss]

justinp1 said:

deva link said:

Plotloss said:

60% 14 days before equipment delivery

20% due now 30 days etc

Sorry if I'm misunderstanding how you've written this, but if you're offering 30 day terms and you invoice for 60% 14 days before delivery then you're not likely to get paid until several weeks after you actually deliver.

I agree, I think that if possible a rethink might simplify it. If it is not immediately obvious the customer usually always reverts to the way of reading ti which delays payment as much as possible!

I agree too.

Payment due 14 days before delivery, so they'll actually get the invoice for the 60% 44 days before delivery, if you see what I mean.

Thanks for all your assistance on this chaps, really is very helpful and very much appreciated. Thanks

[justinp1]

HiRich said:

Eric Mc said:

It's up to you to decide what detail and wording to show on a sales invoice - apart from the minimum stautory details -

Business Name
Address
VAT Number
Company Number (if a limited company)
VAT Exclusive Sale Value
VAT Content
VAT Inclusive Sale Value

The rest is embellishment and down to you.

What he said, although confirmation of terms is rather useful.

Having been on both sides, I would also suggest you make it as easy as possible for the Client's Accounts Department to process it, and for the Client in charge of the project to approve it. So, as relevant, I would also generally try to include:
- Name of person who commissioned the work
- Purchase Order numbers
- Your phone number
- A breakdown of costs in line with the Client's budget/cost-monitoring system (e.g 4.2 - print 50,000-off A5 leaflets, £5,000; 5.5 - Bikes & couriers, £75), if necessary with a supporting sheet.
- Any helpful notes (e.g. "This is the second invoice of three expected. See also Inv. No. 100177 issued 27/01/07"
but of course this will depend on the nature & complexity of the job, your relationship with the commissioning Client, and their procedures. Smileys are not recommended.

Agreed, all stuff which will help speed the ultimate process which is you getting paid on time!

Another thing when I started I was informed by a public sector client that I needed an invoice number for them to process it.

Of course giving out an inovice number 00001 and so on looks a bit, in a word, crap. If you put them in dats as a numeral form then when you search through them when you have loads they are not in any kind of order, but if you reverse the date order so todays date will be 070414, not only does it look like this is not the start of a new system, then when you list the files then they will be in chronological order!

if you want to be even more clever you can add the first three letters or something else memorable as a code for that company for easy reference, which will also help if you send out more than one invoice on one day. ie 070414PH

The reason I mentioned this is that this system will come in handy should you need to send out 2 or 3 invoices for each deal as you will already know the invoice number when you start and get them ready from day 1. Alternatively, you could add a suffix to the coding so the second invoice to PistonHeads would be 070414PH2. Meaningless to everyone but you, but just from just looking at the filename you have the date the job was first invoiced, the customer and which invoice it is in the process.

[Plotloss]

I've been doing that with manual invoices XX/yy/nnnn where xx is me yy is them and nnnn is an incremental number.

But now I'm tring out Sage Instant Acounts invoice numbers seem to be numeric only (unless its a switch somwhere)

[vex]

Cool, does that mean I only accept printed orders from you now!

Personally, and knowing how my (not sage) system works, I would rasie one sales order with three line items on it

Line1 : Project X, 20% Deposit.
Line2 : Project X, 60% Interim Payment.
Line3 : Project X, 20% Completion Balance.

Then (on my system) I can ship/deliver one line item and then invoice them with fixed dates but different serial numbers. But for my accounts it all appears under one sales order number and a single received value.

Happy to talk it though if you want.