I have a (standard) VAT registered Limited company client who supplies kit into business premises on a monthly rental basis. I'm being a bit vague on the product for confidentiality purposes. So let's say its industrial hoovers.
They then also supply 'consumables' used as and when it was needed, let's say shake and vac.
They have just advised that they have agreed with the customers that they will send out 6 months supply of the shake and vac, but then invoice for one month at a time. This decision apparently just to keep the postage and admin costs down, whilst aiding their customer's own cash flow - they want their customers to pay at monthly intervals.
My understanding is that the despatch of 6x tubs of shake and vac create the VAT point.
It is a B2B supply so invoices are required (most if not all of their client base are VAT registered), so the VAT invoice should be sent at despatch (or soon thereafter) for the full 6 months supply.
That being the case, if they then still allow their customers to pay monthly, this would be extremely messy from a credit control point of view, but potentially unworkable as they claim funds against invoice from customers by Direct Debit, via Go cardless. (They use Quickbooks Online)
There is a workaround in that 6 invoices could be issued on day 1 with differing terms, but that will no doubt cause its own issues. There are no identifying features on the shake and vac to quote on ongoing invoices - I can see it getting very messy not least in queries.
By the way, they are a disorganised bunch, so I'm afraid it needs to be kept very simple.
Am I missing something? Is there a way to do this that is simple to manage?
Get them to switch to VAT cash accounting (if within the threshold) is the simplest option, will cause a massive cash flow problem if they have to pay the VAT upfront then wait for payments over 6 months
But I'm missing the issue if standard. Invoice is issued at the start, with payment spread over 6 months. Payment received by DD and netted off on sales ledger. I dont use QB Online but my sales ledger would look like this
Invoice £1000 + VAT Balance £1200
Moonth 1 paid 200 balance £1000
etc.
Please could you add your name to your posts. Profile > Signature. Seems rude to call you AC.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Was more about tax points/making sure I had not missed a 'process' that deferred it.
Probably should have included.
VAT cash accounting not an option. Too much on input VAT on unpaid purchase invoice.
QBO and Go Cardless DDs interaction an issue. Can only claim balance in full. Unless someone can advise otherwise, am new to QBO, was client's choice.
Credit control an issue. Dealing with customers who are not great at paying unless you keep on top of them, bad enough on immediate payment for shake and vac, never mind something they had 6 months prior.
Having 6months outsanding on debtor book not great for attracting finance. One of the 'issues' I alluded to.
Their actions causes more admin work than the amount saved IMO.
