Going through my annual accounts and I have found a few payments I have
received but for which I never issued invoices.

I also had someone pay for 4 products but only had 1 in stock.
I invoiced them for 1, with the intention of invoicing for the other 3 after
sending them, but never did. (they never chased up the other 3 despite the
fact they were over ?00 each)

What happens with this extra money?
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Hiya

I am not an accountant but I would probably either a) refund it or b) take it to a provision called "unclaimed credits" and if not claimed in 2 years then take it to profit.

:)
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It's already over 12 months ago and I had competely forgoten about it until
going through my accounts.
I didn't pay the VAT on the extra money either as I was planning on issuing
a 2nd invoice but never did.

It's further complicated by the fact the invoice was made out to where it
was delivered, but this was wong and I don't even know if they got it or
where I should have sent the 2nd invoice too had I sent the 2nd part of the order.
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Couple of issues here.
First the money received is a sale and should be accounted in your accounts as such with or without the invoice.

You owe the customer these products.
That is down to them to request delivery or refund.

Probably as well to account for the money received and sit tight.
Business is business and business is about profit.
Not nice but if your customer is so disorganised to have not made the claim then it could be argued they deserve what they get.
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I agree with Terry and I used to work for a company in the insurance industry where insurers would pay sums such as ?00k twice or three times and then not bank their refund cheques... no wonder our premiums are so high :)

I used to set-off the unclaimed credits against the bad debt write offs for the period :)
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UKSBD,

If you were one of my clients I would advise you to issue an invoice for the monies received over and above the value of the products supplied, account for the VAT and pay it over to HMRC on your next VAT return.

Where would you code the revenue to?

If you are going to keep the money, not tell the client about the error and believe that the client is not going to spot it for themselves then code to revenue.

If you want to tell the client about the error or believe that there is a chance that they may come back for the money then code to a liability account. I'd create a new one, assuming it does not already exist, called something like "Fees in advance". Keep the monies there until such time as either the client claims the cash or you feel that the likelihood of them claiming the cash is nil. If and when the likelihood of them claiming the cash becomes nil write the monies to revenue at that point.

In a nutshell don't write the monies to revenue until such time as you are sure they will not claim the monies back. If you write the monies to revenue and the client later claims the cash back you will have overstated your profits and paid too much tax in the year you wrote the monies to revenue in.

Regards.

David.
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I agree with Terry and I used to work for a company in the insurance industry where insurers would pay sums such as ?00k twice or three times and then not bank their refund cheques... no wonder our premiums are so high :)

I used to set-off the unclaimed credits against the bad debt write offs for the period :)

I had a similar thing in previous year, but a lot smaller amount, and what
you did is effectively what my accountant told me to do last time.
Rather than just knock it of bad debt though, we classed it as refunds and
I just took cash out and paid it to myself.

Not so sure if he will let me do it with this ammount though :redface:
I took all my books to him today.
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This isn't a sale IMO. It's a payment on account.

If you are one cash accounting then you should have accounted for it at the standard rate, an later make an adjustment if you sell tem something at anything other than the standar rate,

If you are on accrual accounting for VAT then no VAT is due yet as you haven't invoiced.

What you should do is refund the money. Whether you do or not is another matter : )

Duane
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Thanks David,

I don't even know who the invoice should be made out to :redface:
effectively I've got about ?800 from I don't know who, for 3 products I
never supllied.
It's over 12 months ago and I haven't heard anything since.

My accountant has my books now, I'll let you know what he recommends.
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I had a similar thing in previous year, but a lot smaller amount, and what
you did is effectively what my accountant told me to do last time.
Rather than just knock it of bad debt though, we classed it as refunds and
I just took cash out and paid it to myself.

Not so sure if he will let me do it with this ammount though :redface:
I took all my books to him today.

Did you take legal advice on what your position was if you kept the money?

I suspect that you didn't.
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This isn't a sale IMO. It's a payment on account.

If you are one cash accounting then you should have accounted for it at the standard rate, an later make an adjustment if you sell tem something at anything other than the standar rate,

If you are on accrual accounting for VAT then no VAT is due yet as you haven't invoiced.

What you should do is refund the money. Whether you do or not is another matter : )

Duane


I agree with Duane. The morally correct thing to do is to point out the error to the client and either offer them the products they paid for or refund the cash.

However where I disagree with Duane is that if you decide to keep the cash then it is a sale and VAT has to be accounted for. I can't remember the exact wording of the VAT rule off the top of my head (its far to late!!) but the tax point for VAT is the earlier of either the receipt of the money or the issuing of the invoice. You've received the money so the VAT is due.

Regards.

David.
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David, (not Dawg)

The products are here now if ever they ask for them :)
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Did you take legal advice on what your position was if you kept the money?

I suspect that you didn't.

I was wondering that as well. I suspect the taxman might have something to say about it also.
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I had forgotten all about it until getting my paperwork sorted out to take to
my accountant. I did tell the people they were out of stock at the time
and would be at least 6 to 8 weeks, but then never thought anymore about it.
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I had forgotten all about it until getting my paperwork sorted out to take to
my accountant. I did tell the people they were out of stock at the time
and would be at least 6 to 8 weeks, but then never thought anymore about it.

Its easily done. I have a memory like a sieve as well!
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I would probably have remembered if it was the other way around :)
(hope so anyway)
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There is also a money laundering issue here.

technically speaking your accountant should report you to the money laundering authorities about this.

Your best option is to tell your accountant about whats occurred and then either provide the products that have been paid for or refund the money that has been paid.
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Hmmm. This is not a sale/revenue and it need not be invoiced or subject to VAT. You had an order for 4 items, but only shipped 1 and billed 1. The fact that your customer over paid you in error is not your problem although ethically you could refund it but most companies I am sure would hold onto it for a period of time before taking it to profit. In my opinion it is just an unallocated payment or payment on account which has resulted in an unclaimed credit.
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Hmmm. This is not a sale/revenue and it need not be invoiced or subject to VAT. You had an order for 4 items, but only shipped 1 and billed 1. The fact that your customer over paid you in error is not your problem although ethically you could refund it but most companies I am sure would hold onto it for a period of time before taking it to profit. In my opinion it is just an unallocated payment or payment on account which has resulted in an unclaimed credit.

Have a look at Section 1 of the Theft Act 1968 (it's on Wikipedia) and see if you still think that
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Yes I do still think that but probably should have said before about writing to the customer/payer and letting them know that you could not allocate their funds. If you don't have sufficient information then obviously you cant write to them but can still hold onto it for a period of time ready to give back to them if requested. If it is still unclaimed after a period of time has elapsed then OK to take to profit in my opinion.
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