Credit notes & non payment of invoices

[Carl_R_IT]

Hi,

I wanted to get some advice.

I sent a company an invoice which was incorrect (it was a bit more than it should have been), and they rejected the invoice, refusing to pay it, requested a corrected invoice instead before they could pay.

So I sent them a corrected invoice. They have now refused to pay the correct invoice until they receive a credit note for the previous incorrect invoice.

My understanding is that they should have paid the amount they believed they owed on the original invoice and then raised the difference to me. Also, they should have no legal grounds to withhold payment of the correct invoice because they have not received a credit note.

Is this correct ?
Thanks in advance

 

[paulears]

A credit note cancels the debt the invoice created, that's all. If you generate two invoices, then I suppose you need it too - otherwise you'd appear to have turned over more money as you generated two invoices, and if VAT registered, you'd pay both VAT content totals to HMRC.

You submitted two invoices, one wrong - until the paperwork is correct, it seems unlikely they will pay, as you could still then try to enforce the faulty one, couldn't you.

 

[Carl_R_IT]

A credit note cancels the debt the invoice created, that's all. If you generate two invoices, then I suppose you need it too - otherwise you'd appear to have turned over more money as you generated two invoices, and if VAT registered, you'd pay both VAT content totals to HMRC.

You submitted two invoices, one wrong - until the paperwork is correct, it seems unlikely they will pay, as you could still then try to enforce the faulty one, couldn't you.

You are correct, I could try and enforce it, however, there would be a clear paper trail that they have, in fact, paid the invoiced line item, so id be wasting my time.

My question is not really "should i give them a credit note", it more "do they have a right to withhold payment for invoice B until I give them a credit note for invoice A" ?

This is just the tip of the iceberg really, they have been trying to find excuses not to pay up for a few months now, and ive been accommodating so far, but I now really need the money to be paid and want to draw a line.

 

[paulears]

imagine it from their side - what kind off business are you running where they receive invoices for too much, then you won't cancel it? they probably have an accounts department who want things done properly, so while they do owe you, you have very little leverage. just give them the credit note and get paid and hope they stick with you. In their office, what do you think they say about you?

 

[Carl_R_IT]

imagine it from their side - what kind off business are you running where they receive invoices for too much, then you won't cancel it? they probably have an accounts department who want things done properly, so while they do owe you, you have very little leverage. just give them the credit note and get paid and hope they stick with you. In their office, what do you think they say about you?

Again, I've not refused to give them a credit note. They have waited till the invoice is overdue and for me to ask why they have not paid before requesting a credit note. I have told them that I will issue them any credit notes once the agreed sum has been paid.

They have been stringing this out for three months, with the original invoice now overdue for two months and my concern is that even with a credit note, they will continue to string this out for months to come.

What kind of business excepts to not pay for services they have already received for over two months after they are contractually obliged to pay for them.

Again, my question is not about *should* i give them a credit note. I fully intend to, but I don't want to let them use this as a reason to not pay me for another month. My question is simply; do they have a right to withhold payment on invoice B (or even on the correct amount from invoice A)

 

[Carl_R_IT]

It may also be worth mentioning, that after providing my services to them for over two and a half years, I decided to move on and this is my final invoice to them... I have never had problems beforehand and my moving on was purely for business reasons.

 

[Scalloway]

It could be that they entered the original invoice on their accounts system and that same system won't let them delete it. And the procedures will only produce a payment for all invoices on your account so they put the whole amount on hold. So you are stuck with following their procedures.

 

[Smallbusinessman]

Scalloway's scenario is highly likely. Also, your customer has an obligation to pay on receipt of an invoice. But if an invoice is incorrect, the customer has no obligation to pay it. If you have sent an incorrect invoice to a customer, you have an obligation to send a credit note (of equal and opposite value) that can be used to offset Invoice A in the accounts payable system (your account in their purchase ledger). You then issue Invoice B with the current date for the correct amount.

If they don't then pay Invoice B according to the agreed terms, you then start the credit control process running.

Finding fault with an invoice and asking for a credit note / reinvoice is a common play for delaying payment. However, if there was an error on Invoice A which was your fault, then you have to live with the consequences. I suggest that you issue the credit note and Invoice B without delay and send them by Special Delivery (or email asking for a receipt).