advantages of invoicing on a quarterly basis?

[PAH]

Wouldn't work, accounts are prepared on an accruals basis not on a cash received basis.

Not sure my accountant has explained that one to me.

You saying I need to pay tax and VAT on the invoices I've raised but haven't received payment for*, and probably never will from the ******* agency that's gone bust taking my money with them?

At the moment, and the way I'm going to continue until someone with a big enough stick tells me to change:

1. issue invoice
2. wait for invoice to be paid
3. pay VAT due in quarter the invoice was paid
4. pay corp tax on invoices paid in the company's financial year

[the above is with me operating a ltd company on the traditional VAT scheme, not the newer flat rate one]

So in regards the OP's question, point 3 above is the only time I see a real advantage if I manage to delay issuing an invoice so I know it won't be paid until the start of the next VAT quarter. Obviously the delay shouldn't be longer than a week or two or you've only yourself to blame if something happens to whoever is supposed to be paying it.


* the only thing I've seen to support this 'pay up before you receive the money' approach is when on the flat rate VAT scheme, and then you can claim back relief against any VAT paid on invoices that turn into bad debt.

[TheFaQQer]

My colleague seems to think in order to keep corperation tax low you need to keep the business bank account as empty as possible?

Your "colleague" is either incompetent, ignorant, or trying to fool you.

If he spells corporation "corperation" as you do, then I'd go with the first of those.

[DaveB]

Your "colleague" is either incompetent, ignorant, or trying to fool you.

If he spells coporation "coperation" as you do, then I'd go with the first of those.

*cough*

[ratewhore]

At the moment, and the way I'm going to continue until someone with a big enough stick tells me to change:

1. issue invoice
2. wait for invoice to be paid
3. pay VAT due in quarter the invoice was paid
4. pay corp tax on invoices paid in the company's financial year

Yes, that's called cash accounting...

[PAH]

Yes, that's called cash accounting...

Cash is king.

Until we have hyperinflation.

So I shouldn't expect a visit from HMRC () by continuing that method?

[ratewhore]

So I shouldn't expect a visit from HMRC () by continuing that method?

I would hope not.

[northernladuk]

Not sure my accountant has explained that one to me.

You saying I need to pay tax and VAT on the invoices I've raised but haven't received payment for*, and probably never will from the ******* agency that's gone bust taking my money with them?

At the moment, and the way I'm going to continue until someone with a big enough stick tells me to change:

1. issue invoice
2. wait for invoice to be paid
3. pay VAT due in quarter the invoice was paid
4. pay corp tax on invoices paid in the company's financial year

[the above is with me operating a ltd company on the traditional VAT scheme, not the newer flat rate one]

So in regards the OP's question, point 3 above is the only time I see a real advantage if I manage to delay issuing an invoice so I know it won't be paid until the start of the next VAT quarter. Obviously the delay shouldn't be longer than a week or two or you've only yourself to blame if something happens to whoever is supposed to be paying it.


* the only thing I've seen to support this 'pay up before you receive the money' approach is when on the flat rate VAT scheme, and then you can claim back relief against any VAT paid on invoices that turn into bad debt.

Hats off to you for bothering to post a sensible reply to this ridiculous question!

[cojak]

And that is assuming that your agency is competent when it comes to paying all of the days that you invoiced.

Sadly many are not and you could end up out-of-pocket with a 3 month back-date fighting for days not paid by the agency.

Good luck reclaiming them...

[Robot]

Not sure my accountant has explained that one to me.

You saying I need to pay tax and VAT on the invoices I've raised but haven't received payment for*, and probably never will from the ******* agency that's gone bust taking my money with them?

At the moment, and the way I'm going to continue until someone with a big enough stick tells me to change:

1. issue invoice
2. wait for invoice to be paid
3. pay VAT due in quarter the invoice was paid
4. pay corp tax on invoices paid in the company's financial year

[the above is with me operating a ltd company on the traditional VAT scheme, not the newer flat rate one]

So in regards the OP's question, point 3 above is the only time I see a real advantage if I manage to delay issuing an invoice so I know it won't be paid until the start of the next VAT quarter. Obviously the delay shouldn't be longer than a week or two or you've only yourself to blame if something happens to whoever is supposed to be paying it.


* the only thing I've seen to support this 'pay up before you receive the money' approach is when on the flat rate VAT scheme, and then you can claim back relief against any VAT paid on invoices that turn into bad debt.

For clarification: -

There is a difference between cash accounting for VAT and preparing annual accounts on the accruals / prepayments basis.

RE 4. pay corp tax on invoices paid in the company's financial year.

If the year-end is 31 Dec 09, and you invoice on 31 Dec 09 but don't receive the cash until say 2 Feb 10, you pay the corporation tax on the invoice raised 31 Dec 09, on 1 Oct 10.

What I think you are saying is the invoice is paid on 2/2/10 so it appears in the accounts to 31 Dec 2010, CT payable 1 Oct 11, which is not right.

I have ignored bad debts, as you could treat invoices not paid as a bad debt and get corporation tax relief on the bad debt.

[ratewhore]

And that is assuming that your agency is competent when it comes to paying all of the days that you invoiced.

Sadly many are not and you could end up out-of-pocket with a 3 month back-date fighting for days not paid by the agency.

Good luck reclaiming them...

Let's assume the OP has credit checked the agency, and they are good for up to £45K of outstanding debt. Most agents I have credit checked have only been good for £10K.