Invoicing before a dispatch

mindyourlanguage

Hello all

I just wanted to know if you are allowed by law to raise an invoice before the customer has received the goods?

Basically we are invoicing early to get the cash from our factoring company before the job is even finished.

Thanks

hjb123

Hiya,

Its called a 'proforma invoice' - one of the things I can remember from what I am learning from my accounting course!!

A definition - pulled off the web - of it is -

An invoice presented by one company to another for payment for goods prior to their despatch

.

Its perfectly fine for you to be doing what you are doing!

mindyourlanguage

Is this okay even if you are sending the invoice to a factoring company?

We send the invoice and copy of the delivery note to our factoring company who then release the money for the value of the goods invoiced.

Then we send the job to the customer when it finished, basically 2 - 3 days later.

hjb123

Yeah I would of thought that it is - after all you are alreading providing the service/making the goods for the company so you can invoice them for the materials!

santana-mx3

I wouldn't have thought a proforma invoice would satisfy your factoring company. Proforma invoices are generally used when the customer is to pay up before you send the goods. You then issue a proper tax invoice.

Do the terms with your factoring company state that you will only invoice on delivery or on despatch? What about the contract terms with your customer? If you can only invoice on despatch or on delivery then it would be difficult to raise the invoice early. If you are allowed to invoice when the goods are ready (without you having to have sent them) or even to invoice in stages then you should be ok.

mindyourlanguage

The factoring company don't know so we tell them that we have sent the goods and provide them with the invoice.

If they found out could they do anything legally?

hjb123

So they think that you have already sent the goods? By the time payment has been received are the goods with the customer?

I dont think that they could do anything legally!

santana-mx3

I take it then that your terms with the factoring people are that you invoice when you have sent the goods and you're not supposed to invoice when goods are ready or in stages. That's a shame.

I wouldn't advocate lying to the factoring company (though the discrepency of 2-3 days probably won't make a difference). I assume you will send the customer the same invoice with the same date but just not expect the customer to pay based on your invoice date. If you're planning on sending the customer an invoice with a different date to the one you send to the factoring company, then .... well, it's not something I would do.