Prepayment is a payment made previously and prior to the transfer of goods, as well as the performance of work or the provision of services. The use of this type of payment helps to stabilize the relations of counterparties, guaranteeing the interests of commodity owners in case of unstable market conditions, inflation and a crisis in the payment system.
In accordance with the Civil Code, payment by the buyer of goods must be made either before or after they are received. In other words, the transfer of goods and their payment should be as close as possible in time. Thus, an advance payment is an advance received by the seller for a planned delivery.
Kinds
In practice, it is customary to distinguish between the following types of prepayment:
- full amounting to the full amount of the expected delivery;
- partial, represented by a fixed amount or percentage, which are agreed in advance;
- Revolving prepayment is a payment made with continuous cooperation. Often this operation is accompanied by regular shipment of goods or the provision of services.
Score
An advance payment invoice is a document that is designed to pay for a certain product or service. This payment document is very important for both the seller and the buyer.
The form of the invoice form is not unified, therefore, the main requirement for its execution is the reflection of the required details that are necessary to document the actual sale of goods or services.
Return
If the seller fails to provide the goods within the prescribed period, the buyer has the full right to demand a full refund of the prepayment. There is another option for the interaction of counterparties - discussion with the seller of the possibility of delaying the signing of an additional agreement.
In case of refusal to the buyer to return the prepayment, he needs to make a written statement addressed to the seller. This document must indicate the name of the goods, advance payment and the specified delivery time. The application can also indicate the amount of interest that the seller must pay for violation of consumer rights. The application is executed in two copies, one of which is transmitted to the seller under signature.
If the seller fails to review these requirements for ten days, the buyer has the full right to appeal to the court on this issue.
Full prepayment
Increasingly, the interaction of business entities in the modern market uses the concept of "100% prepayment." This is a full payment in advance for the planned delivery of the goods.
This form of payment is quite successfully used when making purchases via the Internet. The user can find an online store with attractive prices. However, he is faced with the fact that the main condition for making purchases is an advance payment of 100%. This in the modern
market of services carries a certain risk, since there are many cases when, having received an advance in the amount of the cost of the goods, the seller simply disappears.
When using this type of payment , a good discount system often works . It should also be noted that in other countries, prepayment is quite successfully used - this is a highly effective tool that stimulates the development of market relations. In this case, the counterparties in this case are treated with understanding and trust in each other.
Advantage from advances
The benefit from advances is a rather relative concept, since the business entity that has received an advance payment still needs to fulfill the obligations stipulated by the contract (to perform work or ship the goods). Therefore, you can talk about generating income only after the actual completion of this interaction.
If the company completely or partially refuses to fulfill its obligations, such an advance will need to be returned.
Thus, prepayment to suppliers is an advance paid against the future delivery of goods. Sometimes the seller may change his mind. In this case, the service is not provided (the goods remain at the supplier’s warehouse), and the money is returned to the buyer.
Prepayment, advance and deposit: some differences
In this article, both concepts were used as synonyms, but in practice there are some differences between them.
So, prepayment is a payment for current deliveries that are made during a certain time period. At the same time, it is assumed that the process of manufacturing and supplying goods or performing work (providing services) does not depend on this payment.
Advances are made against future deliveries. Often, these funds can be used to manufacture a product that will subsequently be delivered to the entity that made such an advance.
Sometimes a certain quantitative criterion is used to determine the differences between prepayments and advance payments. In this case, a partial prepayment can be called an advance. However, the tax and accounting do not place emphasis on the fundamental differences between these concepts. It should be noted also the fact that in the legislation the specified terms meet as synonyms.
In this case, the advance payment and advance should not be confused with the deposit. Often in legislative acts, the definition of the latter term misleads business entities. And yet, a deposit is the amount of money that is issued by one contracting party to the other as evidence of the conclusion of a certain contract. This concept serves as the enforcement of this contract.
If the parties fulfill their own obligations without problems, the deposit can be identified with an advance. However, if there is even the slightest violation of the obligations of either party, the difference between the deposit and the prepayment immediately becomes clear. So, if the failure to fulfill obligations on the part of the entity that provided the deposit is traced, it remains with its counterparty (received this amount). In case of violation of the obligation on the part of the recipient, he must return the deposit to the seller in double size.