Slightly overpaid or underpaid invoice (client paying from a foreign account) - what do I do?
Autor wątku: Dominika D

Dominika D
Wielka Brytania
Local time: 12:13
angielski > słowacki
+ ...
Apr 7

Hi,

I am sorry if this has been posted before but I couldn't find it.

So this happens sometimes when a client pays me from their account somewhere in the EU ( I am UK based self-employed and not VAT registered). Normally it's only a couple of pounds +/-.

They never want the money back (it would cost me a lot to send a few pounds to a foreign account) and I also don't particularly mind when the invoice is a few pounds less, it seems like too much hassle.
... See more
Hi,

I am sorry if this has been posted before but I couldn't find it.

So this happens sometimes when a client pays me from their account somewhere in the EU ( I am UK based self-employed and not VAT registered). Normally it's only a couple of pounds +/-.

They never want the money back (it would cost me a lot to send a few pounds to a foreign account) and I also don't particularly mind when the invoice is a few pounds less, it seems like too much hassle.

Can I record the overpayment as a tip? How?
What about the underpayment? What do you do?

I am new to self -employment so I feel a bit lost.

Thanks!

Dominika
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Enrique Bjarne Strand Ferrer
Norwegia
Local time: 13:13
Członek ProZ.com
od 2017

angielski > norweski
+ ...
currencies? Apr 7

Is there an issue with the curencies?
There is no reason for a client to pay another amount that the one in the invoice. The invoice should also specify the currrency.

If the client does pay erronous amounts in the correct currency, I would flag it. Not necessarily for the money, but to tell them that they have an issue. Also, it gives a very poor impression.

[Edited at 2021-04-07 15:29 GMT]


 

Dominika D
Wielka Brytania
Local time: 12:13
angielski > słowacki
+ ...
NOWY TEMAT
no issue, just conversion I guess Apr 7

Enrique Bjarne Strand Ferrer wrote:

Is there an issue with the curencies?
There is no reason for a client to pay another amount that the one in the invoice. The invoice should also specify the currrency.

If the client does pay erronous amounts in the correct currency, I would flag it. Not necessarily for the money, but to tell them that they have an issue. Also, it gives a very poor impression.

[Edited at 2021-04-07 15:29 GMT]


The client clearly doesn't use a proper tool in their online banking, maybe they do the conversion themselves, I don't know - the point is I don't get the EXACT amount. I can't control which account they pay me from (UK or from abroad) so I guess these things can happen.

For example, I invoiced last month for £90, received £87.16.

So as I said these are very small amounts that neither side is bothered by. I just need to know how to record it properly for tax purposes in case the HMRC are interested.


 

Teresa Borges
Portugalia
Local time: 12:13
Członek ProZ.com
od 2007

angielski > portugalski
+ ...
@Dominika Apr 7

It’s probably associated with currency fluctuations. As this used to happen to me with my USA customers, I solved the problem by sending to the client an “interim” invoice which is replaced by a definite invoice the same day I receive the payment on my account.

Angie Garbarino
 

Chris S  Identity Verified
Wielka Brytania
szwedzki > angielski
+ ...
Do the easiest thing Apr 7

Simplest solution is just to record the amount you receive as revenue. This is fine for the self-employed.

If, like me, however, you have accounting software and you’ve already raised an invoice for £80, you can record an underpayment as a bank charge, and raise a new invoice for any overpayment.

Recording a payment on account is too much of a pain in the backside for such trivial amounts, and I find customers never offset against future payments.

(Simp
... See more
Simplest solution is just to record the amount you receive as revenue. This is fine for the self-employed.

If, like me, however, you have accounting software and you’ve already raised an invoice for £80, you can record an underpayment as a bank charge, and raise a new invoice for any overpayment.

Recording a payment on account is too much of a pain in the backside for such trivial amounts, and I find customers never offset against future payments.

(Simpler still, of course, is get them to pay you in £££)
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Mervyn Henderson
Peter Shortall
Joe France
Nikki Scott-Despaigne
123Translations
 

Dominika D
Wielka Brytania
Local time: 12:13
angielski > słowacki
+ ...
NOWY TEMAT
I hoped this was the case Apr 7

Chris S wrote:

Simplest solution is just to record the amount you receive as revenue. This is fine for the self-employed.



That's also what my friend just told me on the phone. He said they don't need t match and I can just write a note by the transaction with the invoice number explaining the currency fluctuation etc. I do use an accounting software but it doesn't actually require me to match the invoices.


 

William Bowley
Wielka Brytania
Local time: 12:13
hiszpański > angielski
+ ...
Fine print? Apr 7

It looks like the client does not really pay in GBP.

Has the client ever specified that they only pay in a certain currency or currencies, or that they withhold a percentage or amount for transfer fees/bank charges? If they haven't, then perhaps this is in fine print somewhere on a PO or hidden away in payment terms and has caught you out? That's the most likely reason for the 87.16 vs 90 issue as little else makes sense.

I don't know how they do things - perhaps they'r
... See more
It looks like the client does not really pay in GBP.

Has the client ever specified that they only pay in a certain currency or currencies, or that they withhold a percentage or amount for transfer fees/bank charges? If they haven't, then perhaps this is in fine print somewhere on a PO or hidden away in payment terms and has caught you out? That's the most likely reason for the 87.16 vs 90 issue as little else makes sense.

I don't know how they do things - perhaps they're calculating £90 in EUR or other currency and then converting back when the payment is made and the conversion rate has changed. Even so, that's not your problem and you should still be receiving the exact GBP amount invoiced.

If you are set up as a UK sole trader you can simply pay tax on the money actually received. Recording it as a 'tip' won't change anything as you still have to pay tax on the actual sum received.
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Dominika D
Wielka Brytania
Local time: 12:13
angielski > słowacki
+ ...
NOWY TEMAT
@william Apr 7

Sure, it could also be that the client chose the bank charges to be applied to me and not them.

However, it doesn't explain why I sometimes get OVERpaid. the only explanation there is that they do the conversion themselves, then add that amount in EUR but when it arrives either my bank or the client's bank uses a different rate.


 

ATIL KAYHAN  Identity Verified
Turcja
Local time: 14:13
Członek ProZ.com
od 2007

turecki > angielski
+ ...
Monitor Apr 7

I would not bother to take an action at this time for minor amounts. If you end up losing some money in the long run (over a year period, for example), I would write to client(s), and ask for their help to correct the discrepancy from that point on. As far as taxes are concerned, I think it is what you actually receive in the bank that matters. I might be wrong though. I am not a tax man.

Peter Shortall
 

Enrique Bjarne Strand Ferrer
Norwegia
Local time: 13:13
Członek ProZ.com
od 2017

angielski > norweski
+ ...
Afgio Apr 7

Chris S wrote:

Simplest solution is just to record the amount you receive as revenue. This is fine for the self-employed.

If, like me, however, you have accounting software and you’ve already raised an invoice for £80, you can record an underpayment as a bank charge, and raise a new invoice for any overpayment.

Recording a payment on account is too much of a pain in the backside for such trivial amounts, and I find customers never offset against future payments.

(Simpler still, of course, is get them to pay you in £££)


Another solution, and the best solution accountingwise, is simply to sum up all deviations during the year and add/subtract them to you earnings at the end of the year as agio.


Chris S
 

William Bowley
Wielka Brytania
Local time: 12:13
hiszpański > angielski
+ ...
@Dominika Apr 7

1) Whatever the case may be, it looks like you haven't set clear payment terms between translator and client. That should be your first point to rectify with this company. Ask why the amounts aren't exact and confirm that they issue payments in GBP. That is the logical solution and good business practice if every payment is off from the invoice amount.

2) They are not paying the exact amounts on your invoices, which, particularly given the overpayments, most likely means that they a
... See more
1) Whatever the case may be, it looks like you haven't set clear payment terms between translator and client. That should be your first point to rectify with this company. Ask why the amounts aren't exact and confirm that they issue payments in GBP. That is the logical solution and good business practice if every payment is off from the invoice amount.

2) They are not paying the exact amounts on your invoices, which, particularly given the overpayments, most likely means that they are converting from another currency and/or you are invoicing them in a currency in which they do not issue payments. Both of those reinforce my point from 1).

The fluctuations in exchange rate are their responsibility to bear. £90 invoiced in month x should be paid as £90 in month y regardless of exchange rate. This again reinforces point 1).

Are the slight over/underpayments roughly correcting each other? That would seem an odd way of doing things but if for example you invoice twice for £90 and they pay 86 and 94, then ultimately you're all square (I'd still request exact payment of each invoice, but each to their own).

I am not a tax expert and/or accountant, but as a UK sole trader, unless you've set up otherwise, you'll owe HMRC based on money that enters your accounts, not potential, invoiced, desired, theoretical or adjusted amounts.

[Edited at 2021-04-07 23:06 GMT]
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Chris S  Identity Verified
Wielka Brytania
szwedzki > angielski
+ ...
Yes Apr 7

Enrique Bjarne Strand Ferrer wrote:
Another solution, and the best solution accountingwise, is simply to sum up all deviations during the year and add/subtract them to you earnings at the end of the year as agio.


Yes, this is a good solution for tax purposes (Norwegian “agio” = currency gains)

But this can be annoying with accounting software as your books will not reconcile all year long...


 

Nikki Scott-Despaigne  Identity Verified
Local time: 13:13
francuski > angielski
My thoughts Apr 8

In my experience, this type of event presents two tricky bits:
- the amount invoiced does not match the amount received
- national accounting regulations probably require the amount received to match the amount invoiced

As Chris S points out, what interests most countries is that the amount you record for accounting purposes matches the amount received. Some accounting software may flag this up but there are generally ways to account for this, making a note or accounting
... See more
In my experience, this type of event presents two tricky bits:
- the amount invoiced does not match the amount received
- national accounting regulations probably require the amount received to match the amount invoiced

As Chris S points out, what interests most countries is that the amount you record for accounting purposes matches the amount received. Some accounting software may flag this up but there are generally ways to account for this, making a note or accounting for discrepancies of this sort. If you ferret around in your manual, you may found troubleshooting info in the small print somewhere.

If you still get no joy, then you might like to get "horse's mouth" type information on this type of detail. Your local tax office should be able to help.


[Edited at 2021-04-08 10:07 GMT]
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Samuel Murray  Identity Verified
Holandia
Local time: 13:13
Członek ProZ.com
od 2006

angielski > afrikaans
+ ...
@Dominika Apr 8

Dominika D wrote:
Can I record the overpayment as a tip? How?
What about the underpayment? What do you do?


The tax authorities in all countries are aware of things like currency exchange variation, hidden banking fees, etc. They know that the amount you receive may be only more or less the same as the amount on the invoice, and that you may not be able to account for every penny. So, don't worry too much about it.

If you're using turnover-based accounting (i.e. you pay tax on the invoice amount instead of the amount received in your bank account), then all you need to do is add an extra column in your accounting spreadsheet for the actual amount received. Then at the end of the year, count up both columns (the column with the invoice amounts and the column with the amounts received), and declare the difference either as extra income (if you received more) or as a business expense (if you received less).

(If you do this, don't forget to not accidentally deduct transaction fees twice, since some of the difference between the amount invoiced and the amount paid would be due to transaction fees that you may be keeping track of otherwise.)

If there is a large discrepancy between the amount invoiced and the amount received, then obviously you should take this up with the client to find out if they had accidentally paid too much (or too little). But up to a 5% difference in the amounts would not worry me.

[This is essentially the same as Enrique's advice.]

[Edited at 2021-04-08 11:34 GMT]


Chris S
Nikki Scott-Despaigne
123Translations
 

Nikki Scott-Despaigne  Identity Verified
Local time: 13:13
francuski > angielski
Other possibility Apr 8

Your own bank is applying charges that are not yet appearing on your statement. It might be worth giving them a call to see if this is the case.

 


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