Invoice Dating issues

Sharonjayne

A company selling a simlar product to ours is having money held by the bank due to apparently falsifying invoices. The company factors their invoices. The business prints for a customer and invoices them on the date of completion. They are ready for delivery from this date though customer requires the order to be held at the premises until needed due to storage issues. The bank is saying that they are not allowed to invoice until the product leaves and this is fraudulant.

kelsmick

I've never heard of this before?
It's a little strange for the bank to know the invoice details also, surely they don't need this information for a transactions to take place? I've never heard of a bank stopping the transaction because of an invoice, surely it's none of their business what the payments are for so long as theirs sufficiant funds in the account.
I've worked in many places where good have been paid for before the goods are available - if it's a new customer for example.
I would go back to the bank and ask for more information or go in branch and speak to them. Why they have details of the invoice is a little baffling.

Sharonjayne

The invoices are being factored. If you don't know about factoring you in a nutshell sell your invoices to the bank for a percentage, they relaese the money to you within 7 days rather than waiting for the 30 days terms. This sometimes helps struggling businesses with their cash flow. The bank will occassionally contact the constomers to ensure that these invoices are real and not been created to get money from the bank. This company is being accused of invoicing too early.
My question is what date should the invoice be? When the product is produced or when it leaves the premises?

kelsmick

Ah right i see. I would of went with the date the good became available but i guess it would maybe depend on the terms set by the bank? perhaps they don't want the date to be invoiced until the goods arrive at the customers premises?

Is the company VAT registered? As you would have both the invoice date & tax point date. Could it be that which they are referring to?

Sharonjayne

The company is VAT registered but not all goods are vatable as its printing. That was my first guess but its not evading tax. Its paying it too early. With factoring companies one could say to regular customers, "if you will require more of these items can we print more of them now for you so we can get it into this months invoices" therefore releasing the monies early. This isn't allowed, but on the outside appears no different to something that is invoiced an held at the customers request. But customers request this all the time. In printing its cheaper for the customer to have larger orders but they often don't have storage space so the printing company simply stores it for them.

CeeJaySix

I may be barking up the wrong tree because factoring contracts may have their own terms (I have no experience there), but revenue may be recognised when substantially all the risks and rewards of ownership have been transferred. There may be explicit terms in the contract of sale which specifies when this is (and certainly incoterms if it's a foreign purchase) - for example under EX WORKS, risks/rewards transfer once the product is available to the buyer at the seller's premises - it does not need to be delivered. In the absence of explicit terms, it is a point of common law that risk passes to the buyer once the seller has fulfilled their contractual duties, so if delivery is not part of the contract, merely having the goods available for collection is sufficient.

If it's appropriate to recognise revenue then it is appropriate to issue an invoice.

I'm sure there will be someone more knowledgable here, but in my opinion you need to look carefully at the terms of the contracts to determine when the sale actually takes place.