Hi. We have recently received an invoice less a LAD's deduction due to unavoidable delays in the project. As the original invoice has already been logged onto SAGE how do I process the LAD's deduction? Would it be appropriate to issue a credit note or would that throw problems as the LAD's is a deduction from payment and not a credit. Any advice would be welcome as I have never come across this before. Thanks
Hi. well, yes and no. The story is that this was a supply chain which we were in the middle of. Our supplier failed to complete in the specified time which meant that we failed to complete our part of the work in the specified time frame and therefore we failed to complete to our client in the specified time frame. As a result the end client has reduced his payment to our client, who has reduced their payment to us, and we have reduced our payment to our supplier. All in line with the agreed contract and with the correct documentation regarding the LADs. However I have Invoiced our client for the full amount but will now receive a reduced amount leaving me with what looks like an unpaid portion of the invoice which I need to account for through Sage. In addition I have an invoice from our supplier which we are not going to be paying in full and this will also need to be accounted for through Sage. Its all getting terribly complicated. I hope you understand what I mean. The entire chain have agreed the LAD's so there are no legal issues but I don't want to be left with unpaid purchase and sales invoices left sitting on my accounts program.
I have not been involved in LADs so it is worth checking out the position with regards to actually issuing and obtaining credit notes for the actual LAD amount (as mentioned due to the legal issues). But from a sage point of view you can clear the amounts involved either by the issue/receipt of a physical credit note or key a dummy one (both on the customers and suppliers sides) but I would key the credit note to two separate nominal codes set up so the accounts reflect the LAD amounts - call them eg LAD received/LAD incurred or some such. Care though re the VAT as I understand damages are outside the scope - have a look at this....www.hmrc.gov.uk/manuals/vatscmanual/vatsc35600.htm and again speak to the Accountant if you are not sure.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
