Agreement and invoices

[JamesDonkey]

Questions:

1) Does an agreement, if paid in full, have to have a single invoice?
2) Likewise, for multiple partial payments for an agreement, there'll N invoices?
3) Does an invoice have to refer to the agreement somehow? And if so, how? By some unique number if I'll have to come up with?

4) And invoices can be issued retroactively, if needed, right? Because how would a bank or tax man verify when precisely an invoice was issued: today (retroactively) or 1 month ago?

 

[Sols]

The answer to some of these questions vary depending on applicable law, so consider my answer generic.

1) Does an agreement, if paid in full, have to have a single invoice?

No. You can have multiple invoices under a single agreement. It's all up to how you draft the agreement.

2) Likewise, for multiple partial payments for an agreement, there'll N invoices?

Depends. If your agreement allows partial payment of invoices, you can issue an invoice for 100,000 EUR and let the buyer pay 50,000 and then 50,000 on the same invoice. Again, it's up to what you stipulate in the agreement.

Usually not a problem as long as it's all within normal business practices.

3) Does an invoice have to refer to the agreement somehow? And if so, how? By some unique number if I'll have to come up with?

Normally, the invoice should be issued to the same party (usually company) as signed the agreement. For good accounting records, you should at least give each invoice a unique identifier. Some accountants will insist on invoices being sequential but this isn't always required. Same goes for assigning clients with a customer ID that you come up with and add to each invoice.

4) And invoices can be issued retroactively, if needed, right? Because how would a bank or tax man verify when precisely an invoice was issued: today (retroactively) or 1 month ago?

Within reason, yes. This varies a bit depending on applicable law and nature of transaction, so check with your accountant/legal adviser for specifics.

 

[Forester]

Fully agreeing with @Sols, with emphasis on the statement ”The answer to some of these questions vary depending on applicable law“ (I personally am aware about one jurisdiction where the answer to the question /4/ and to some extent /2/ is different).

 

[JamesDonkey]

Let's say one customer sent me 3 payments, to my biz account, during multiple days.

If I were to create invoices retroactively, would I have to create precisely 3 ones? And each would have the precise amount that was sent?

Could I issue, let's 5, or 1 invoice, and adjust the amounts in each one accordingly, such that the total amount in the 1 or 5 invoices would match the total $ of the 3 payments.

 

[Sols]

Let's say one customer sent me 3 payments, to my biz account, during multiple days.

If I were to create invoices retroactively, would I have to create precisely 3 ones? And each would have the precise amount that was sent?

For that specific of a question, you should ask your accountant or legal counsel as it can vary. Whatever you do has to comply with local law.

As a general rule, it would be better if there were three invoices corresponding to each payment. But there are situations where it would be perfectly fine to issue a single invoice and simply tally up the three payments against that one invoice. Preferably, the sender includes the same invoice or reference number in the transaction message.

Could I issue, let's 5, or 1 invoice, and adjust the amounts in each one accordingly, such that the total amount in the 1 or 5 invoices would match the total $ of the 3 payments.

Yes, but it sounds like you're not really doing proper accounting and instead shaping your invoices around transactions that have already taken place.

Businesses normally issue invoices for predetermined amounts, which are defined in an agreement. If you deviate from that, it may come across as suspicious and if someone at a bank or tax authority feels the same way, you might trigger further checks that go beyond just asking for invoices and agreements. Then you might find yourself having to prove that you did supply the goods or services invoiced for. So whatever you have done for your client (the buyer), you may need to show evidence for. It's a slippery slope that has a high chance of ending with closed accounts or frozen/returned funds.

Accounting is super easy to get right. Just outsource it.

 

[Forester]

Let's say one customer sent me 3 payments, to my biz account, during multiple days.

If I were to create invoices retroactively, would I have to create precisely 3 ones? And each would have the precise amount that was sent?

Could I issue, let's 5, or 1 invoice, and adjust the amounts in each one accordingly, such that the total amount in the 1 or 5 invoices would match the total $ of the 3 payments.

I am sorry; but without knowledge of the jurisdiction you are underlying / applicable law nobody can give you a valid answer. If you share abovementioned information, maybe someone (in addition to the accountant / legal advisor in the relevant country) will know...

EDIT: Ohh. Now I see @Sols was faster; replying when I was writing – and in a more exhaustive way. Like

 

[JamesDonkey]

What

I am sorry; but without knowledge of the jurisdiction you are underlying / applicable law nobody can give you a valid answer.

My question is general. Can it be legal in one jurisdiction while illegal in other?

Yes, but it sounds like you're not really doing proper accounting and instead shaping your invoices around transactions that have already taken place.

It sounds like that you, as usually, try to conclude some things when there's lack of information to make conclusions, and give unsolicited advice.

I'm not doing anything at the moment excepting asking some questions here.

As a general rule, it would be better if there were three invoices corresponding to each payment. But there are situations where it would be perfectly fine to issue a single invoice and simply tally up the three payments against that one invoice. Preferably, the sender includes the same invoice or reference number in the transaction message.

Helpful.

 

[Sols]

It sounds like that you, as usually, try to conclude some things when there's lack of information to make conclusions, and give unsolicited advice.

I'm telling you how it comes across and how that in turn might be viewed by compliance personnel that may, one day, be viewing the process retroactively. I apologize from the bottom of my heart if my words caused you harm and dismay. You're more than welcome to ignore me, to avoid future trauma.

 

[Forester]

Can it be legal in one jurisdiction while illegal in other?

Of course. It is exactly so. (Not even taking into account that something that is illegal in two different jurisdictions can be taken as a minor offence in one and as a felony in another.)

 

[AMD]

Of course. It is exactly so. (Not even taking into account that something that is illegal in two different jurisdictions can be taken as a minor offence in one and as a felony in another.)

that's how the world is functioning for now.