apologies if similar question had already been posted here, but I couldn't find an answer.
We have a balance on the customer account in accounts ended 31.03.14 of just over £26k for 6 different invoices.
Now this customer has decided to start as the new company to get finance and is ready to pay our invoices but their bank cant accept invoices dated before company registration date.
They have asked me to re-issue all invoices (for the same amount, even the same customer name) but with today's date on them.
Can you please advice whether it is OK just to send off those invoices without posting them in our accounts and record the payment against original invoices?
What does the invoice have to do with the bank? When did banks ever look at the dates on invoices that a company is paying?
If you change your invoice dates the link to when the revenue was earned will be lost so your own accounts will be wrong by what I would assume to be a material amount (and your business would get in trouble for earnings management).
Personally I would keep my original invoices but, if they are adamant you could issue an off system invoice which to the outside world consolidates the existing six invoices only for the purpose of the invoice with the reality being the six still remain on your system and the consolidation invoice is more of an account statement that exists off it.
Of course, the company that you did the work for does not actually exist anymore. Is the forming of the new company dependant upon your agreement as an existing creditor? Will you be throwing the strength of your position away by agreeing to the request or perhaps ensuring that you never receive the money if you do not?
Your revenue still needs to be reported in the correct period and carried as a debtor to the following period where it is cleared by the payment even though the invoice is not to the same company that the sales was originally made to as its a reconstruction rather than a bad debt.
Will you treat the two as the same company through your system?
Remember always that you did the work for the old company that is paid by the new one. I appreciate that it would be very easy to end up with a situation where it looked as though the work had been done twice but paid for once with the old company being a bad debt but if you ended up with that it would be wrong.
Also watch out for the client expecting that with a reissue of invoices they are expecting a restart of the credit terms. Nothing has moved from you wanting immediate payment for an outstanding debt.
Also beware issueing new invoices to a company that no longer exists.
Wit the number of variables and inherent risk in this scenario you really need your companies accountant iwho is privy to all detail of the scenario nvolved in the decision making prior to agreeing to anything.
As a complete aside, you may also want to look at your companies credit control that a client was allowed to get to this stage without someone pulling their credit line.
Good luck with getting the money Ozia,
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I know, it's all very strange with this client, but I should have also mentioned that they are based in Brazil where they claim its necessary to submit an invoice together with the application for overseas money transfer to the bank.
Very different to we are used to, isn't it!
It does seem to me that the only way to get the money from them is to re-issue the invoices with today's date. And of course I will stress that terms are strictly immediate.
And following your kind advice I will just deal with it 'off system', hope for the fast payment and post it against the original invoices.
I agree, raise credit notes to credit the invoices as of the current date, then raise new invoices on the same day that negate the credits in the current period. That would be the proper way to do it, but to be honest it won't make a difference if your just doctored them to show different dates, you wouldn't be understating or overstating your income, it's for your customer's benefit, not your own.
I see logically where you are coming from but we've got money laundering regulations in the UK tied to our tax laws. Although you will have something similar in Canada I doubt if its quite the same.
If the amounts are allocated to incorrect period thats actually profit smoothing which is a form of tax evasion.
To "doctor" dates breaks financial reporting standards (IFRS and UKGAAP), money laundering regulations and HMRC requirements.
So afraid that I have to disagree on the last part of your post as nice as we are to our clients we cannot adopt a position where we are breaking the law for them.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
