Invoicing deposits

[Graeme Harrold]

Im running quick books……..Invoice for the whole job and then accept a deposit payment in against their account. I also note this in the comments box for the invoice just for the reminder.

[Phill Fenton]

Good question Katie – we have the same problem. We do the same as you and issue a receipt when we take a deposit. Then when the job is done we issue an invoice for the full amount and deduct the original deposit.

Occasionally it can transpire that we take an initial deposit for generating artwork. If the job does not progress beyond this stage we have to then put a payment through our accounting system to account for this deposit.

I agree with you this is not ideal, and would also be interested in other ways of doing things that tighten up the procedure.

[Graeme Harrold]

Suppose the other way to do it is generate all the work in an "Estimate" and call forward work to the "invoice" as it is confirmed. i.e. if its just artwork and the job goes no further then everything is square.

The invoice route also requires the printing of a customer statement to show payments as subsequent reprints of invoices with part payment do not show the reduction in total due.

As always, if you are using an accountant, they should best advise you, after al it may make their job easier if using their method (and lower your bill :lol1: )

[Paul & Katie Dyer]

Thanks for the replies guys…

In an ideal world, I think I would like to hit them with an invoice for the deposit when they accept the quote, and hand over another when the job is done for the balance. I know you can’t really have 2 invoices for one job, but like the idea!

It is never easy asking for money, which is what usually happens for the deposit, I would much rather hand over a piece of paper, ‘you owe this much and we won’t start work until we receive this’

Any ideas, or am I just gonna have to grow some balls and tell them straight? (I do put on the quote that a 50% deposit is required)

Katie

[Lynn Normington]

Katie new customers it is always a deposit before work is started, we never give a print out before a deposit, we don’t invoice until the work is done, the deposit is deducted from the invoice.
we have recently started taking credit cards ,this is for the ones that you have spent an hour of your time on, they say ok when can you do this?? we say well give us a deposit and we will do it on Tuesday, they then pull the wallet out and say I have no money!!!!!! (thank goodness they weren’t in Tesco that would be theft!!)

Lynn

[Graeme Harrold]

Always find asking for a deposit awkward, but insist that credit is not a right, but is earned over a period of time (and checks). A good line to use is " My business insurance insists on a minimum of 50% to safe guard against non-payment retrieval"

[Paul & Katie Dyer]

quote :

Katie new customers it is always a deposit before work is started, we never give a print out before a deposit, we don’t invoice until the work is done, the deposit is deducted from the invoice.

Thanks Lynn, does that mean you have to ask them for the deposit verbally?

Katie

[David Rowland]

invoice is generated whenever we handle any form of payment, has to be. A payment is then cross against it.

[Warren Beard]

I normally only give a receipt for a deposit if paid cash otherwise they have proof they paid you if they pay by cheque. I supply invoice for full amount upon completion indicating amount of deposit received and amount now due.

cheers

Warren

[David Rogers]

quote Paul & Katie Dyer:

Thanks for the replies guys…

…It is never easy asking for money, which is what usually happens for the deposit, I would much rather hand over a piece of paper, ‘you owe this much and we won’t start work until we receive this’

Any ideas, or am I just gonna have to grow some balls and tell them straight? (I do put on the quote that a 50% deposit is required)

Katie

It’s actually pretty easy to get MOST people to part with a deposit of around 50%.

Once they have agreed to the job, design & price – POUNCE…don’t let them walk away…it’s all too easy for ‘signs’ to become a lower priority all of a sudden!

"We normally take a 50% deposit before work commences – how would you like to pay."

It’s not "would you like to leave a deposit"…"or how MUCH would you like to leave as a deposit" which can easily back-fire – yet you leave them feeling (slightly) in control and NOT under pressure with "How would you like to pay?".

They have 99.9% committed themselves to the job before you even ask this. The chances of them canceling an order is so remote, and besides you don’t actually WANT customers that refuse to give deposits.

Obviously there is flexibility, like today I took £200 for a £500 job and £50 for a £300 job because that was the funds that were immediately available and I’m not exactly going to be left out of pocket if it went pear-shaped.

Sometimes I’ll push for full payment in cash – in advance if I get ever the slightest whiff of them being a real pain in the proverbial…that way, you can just get on with making them without that nagging feeling that you won’t see the balance any time soon!

You might want to invest in 2 or 3 part ‘order sheets’ that cover all of the relevant details and includes an area for noting deposits taken.

As far as receipts for deposits go – maybe 1 in 50 of my customers ask for one – the rest have faith!

Dave

[Phill Fenton]

quote Dave Rowland:

invoice is generated whenever we handle any form of payment, has to be. A payment is then cross against it.

Not all payments require an invoice – when I buy my Daily Star newspaper in the mornings I don’t get an invoice – I get a receipt.

[Paul & Katie Dyer]

quote Graeme Harrold:

Always find asking for a deposit awkward, but insist that credit is not a right, but is earned over a period of time (and checks). A good line to use is ” My business insurance insists on a minimum of 50% to safe guard against non-payment retrieval”

I like that thanks Graeme! :lol1:

I think it is probably a good idea to use a third party to blame :lol1:

I have never had a problem when I have worked for companies asking for money, so why should I when it is for my own company? (even sat on the till at sainsburys one afternoon- enough for anyone beleive me, it was easy saying £109.76 please! They hand over their cards like little lambs! I say it now and they will ‘pop a cheque in the post’ …yes you know them all too!

Katie

[Chris Dowd]

We use Sage. Process the full invoice as a "proforma", allocate any deposit to their account, then once the job has been completed convert the proforma to an invoice.

Not sure if you can issue an invoice just for a deposit as technically it’s not goods or services????? also would a deposit be VAT exempt?????

[Chris Wool]

quote :

In an ideal world, I think I would like to hit them with an invoice for the deposit when they accept the quote, and hand over another when the job is done for the balance. I know you can’t really have 2 invoices for one job, but like the idea!

eg you quote 200 +vat to do a van

invoice 1
deposit against lettering to van £42.55 +vat = £50.00

when completed

invoice 2

lettering to van £200 -deposit £42.55 157.45 +vat = £185

185 + 50 = 235

chris

[Phill Fenton]

I can’t see how a deposit ould be VAT exempt Chris (Dowd). If you’re VAT registered you are required by law to charge VAT on all your products abd services. The deposit amount by implication is also subject to VAT surely?

[Chris Dowd]

VAT is charged on Sales though Phil, and a deposit is not a sale!

Interesting one that!

[Paul Humble]

Thats what I do Chris (Wool), its never even crossed my mind that it might be wrong. I just note the invoice number of the deposit on the final invoice so I know whats what.

[David Rogers]

quote Paul & Katie Dyer:

….. it was easy saying £109.76 please! They hand over their cards like little lambs! I say it now and they will ‘pop a cheque in the post’ …yes you know them all too!

Katie

I’d watch yourself with that one given the current economic climate.

We’ve presently got a few people playing at silly buggers!

In the post tomorrow…I’ll be in this afternoon…oh, sorry I just forgot…give it a few weeks and….[doo daa deee – this number has been disconnected…] and you’re left up the creek unable to afford a paddle…you’re not a 0% interest lending bank, you are their supplier!

Deposits & VAT…tricky one. The instant that you start manufacture it becomes a ‘part payment’…before that it’s a transfer of funds. Weird.

Will ask the ‘boss’ tomorrow…there’s honestly not much about money, consumer and employment law he doesn’t know!

Dave

[Chris Wool]

its part off or pre payment so vat charged as i understand it

chris w

[Paul & Katie Dyer]

My understanding is that a proforma invoice is not legally binding?? not sure if that is correct or if it is just that a company just doesn’t have to pay it, which would be fine, we just wouldn’t do the work!

We aren’t vat reg so that is not an issue.

Katie

[Chris Dowd]

To correct you on your other point though Phil, you do not have to charge VAT on all of your goods and services, some items are VAT exempt.

We do a job annually for a registered charity where we supply and fit a large quantity of banners in various locations around a town. We cannot charge VAT on any form of advertising where they advertise in someone else space, only if they advertise on their own premises.

Before anyone comes back on this, we have written confirmation from HMRC that this is correct (for registered charities).

Also, our rent is VAT exempt (the landlord has the option of this on new builds), and our landlord is our local authority.

[Paul & Katie Dyer]

quote Chris Wool:

quote :

In an ideal world, I think I would like to hit them with an invoice for the deposit when they accept the quote, and hand over another when the job is done for the balance. I know you can’t really have 2 invoices for one job, but like the idea!

eg you quote 200 +vat to do a van

invoice 1
deposit against lettering to van £42.55 +vat = £50.00

when completed

invoice 2

lettering to van £200 -deposit £42.55 157.45 +vat = £185

185 + 50 = 235

chris

I like this :lol1:

…just worried I may seem unprofessional doing it this way 😳

Katie

[Phill Fenton]

quote Chris Dowd:

Also, our rent is VAT exempt (the landlord has the option of this on new builds), and our landlord is our local authority.

Your getting a bit confused Chris – this is your landlord that is not charging VAT – not you :lol1:

[David Rogers]

As far as I understand it – a pro-forma is a legally binding contract… (at least in the eyes of the goods receiving party)

It’s as though the goods / service has already been issued under contract.

eg. A business could get a bank loan on the strength of a pro-forma.

Just looked this up….edited to add.

From the RBS website

quote :

Commercial contracts
A commercial contract is a legally binding agreement between
two or more parties concerning the purchase and sale of
goods or services. It could be either a formal contractual
arrangement, evidenced by a contract document, or in the
form of a purchase order, sales note or sales proforma. The
contents of these documents reflect the underlying deal. In
purchases and sales within the UK for example, the majority
are on the basis of invoices, sales notes etc.
As these documents may be used in a court action in the
event of alleged non-performance, it is important that the
seller’s basic and overriding terms of trade are pre-printed on
the back of the invoice or sales note. Where, for example,
there is a guarantee or warranty stated or implied, it would be
wise to include a restriction of liability as to the amount and
the period of the liability.

[Chris Dowd]

I’m not confused Phil, you clearly stated:

"If you’re VAT registered you are required by law to charge VAT on all your products and services."

My local authority IS VAT registered, provide a service, and DO NOT have to, neither do I! 😀

[Chris Dowd]

I think your right on the proforma bit there Dave, the only thing you can’t use a proforma for is to reclaim VAT. For that you require a full invoice.

[Chris Wool]

there is nothing unprofessional about giving a recite for money received what ever the amount and it leaves a good paper trail. important in larger business for another member of staff to follow.

chris

[Phill Fenton]

This is news to me – I need to take some advice from my accountant. Ordinarily I alway charge VAT on all my products and services – this includes all the many charities I have provided work for over the years.

[David Rogers]

quote Phill:

This is news to me – I need to take some advice from my accountant. Ordinarily I alway charge VAT on all my products and services – this includes all the many charities I have provided work for over the years.

That is quite correct. Unless THEY present you with a VAT exemption form you HAVE to charge them VAT (well – YOU get charged the VAT on the value.

With the form – it can be attached to their invoice in your records for the accountant & inland revenue to note.

With an exemption form…you don’t charge it…and they don’t pay it.

Dave

[Phill Fenton]

My standard retort to every clown that offers to pay cash if I don’t charge them VAT is "I am required by law to charge VAT on all my products and services" . But next time the question is asked, I’ll ask to see his VAT exemption certificate – that’ll confuse them. :lol1:

[Chris Dowd]

I know this ones going a bit off topic, but to clarify (taken from the HMRC website):

3.1 In what media can charities advertise VAT free?

Any medium which communicates with the public. This includes all the conventional advertising media such as television, cinema, billboards, the sides of vehicles, newspapers and printed publications. The important factor is whether the advertisement is placed on someone else’s time or space. If it is not there will be no scope for zero-rating.

If space is sold to a charity for advertising on other items, such as beer mats, calendars, or the reverse of till rolls, this will also be covered by the zero rate. The sale of the items themselves will not be VAT free, unless they qualify for other reliefs for example as books or children’s clothing.

It was news to me, our Accountants and the HMRC inspector the first time we had a VAT inspection. It was only the Charity being so knowledgeable and rejecting our first invoice (several years back now) that we found out about it!

[Paul Humble]

quote Phill:

My standard retort to every clown that offers to pay cash if I don’t charge them VAT is “I am required by law to charge VAT on all my products and services” . But next time the question is asked, I’ll ask to see his VAT exemption certificate – that’ll confuse them. :lol1:

On the flip side of that I had a customer asked him if I could add £50 onto his invoice as his parents were paying and he wanted to pocket some money!

[Paul & Katie Dyer]

quote Paul Humble:

On the flip side of that I had a customer asked him if I could add £50 onto his invoice as his parents were paying and he wanted to pocket some money!

Ditto

had this twice this week!

one was an insurance fiddle I thought so stuck to my guns!- nothing in it for me but increased premiums next year- well someone has to pay for the fiddles- don’t they?

the second was a friend in the right place who hinted what the budget was while handing back the quote 😛

Katie