Category: articles

ROI with ERP – How do you calculate the return on investment?

Post author By Maksymilian Śniegocki
Post date December 19, 2024

Table of content

What is ROI?
ROI – what does it inform about?
The formula for ROI
What kind of ROI is good?
How much does ERP cost?
How to calculate the ROI of ERP?

ERP (Enterprise Resource Planning) systems are a key tool for managing a company’s resources, enabling the integration of various business processes. An investment in ERP can bring significant benefits, but its cost is also substantial. To assess whether an ERP implementation is cost-effective, it is necessary to calculate the ROI or return on investment. In this article, we will explain ROI, how to calculate it and assess its value in the context of an ERP investment.

What is ROI?

ROI (Return on Investment) is a financial indicator that determines how much return an investment has brought about the costs incurred. It is one of the most popular methods of evaluating the effectiveness of projects, especially those requiring significant financial outlays, such as implementing an ERP system.

ROI measures whether an investment is financially beneficial and to what extent the expenses have been returned. Thanks to its simplicity of calculation, this indicator is widely used by both large corporations and smaller companies.

ROI - what does it inform about?

ROI informs about the profitability of the investment, which is particularly important for entrepreneurs planning to implement ERP. A positive ROI means the investment makes a profit, while a negative ROI indicates a loss.

In the context of ERP, ROI can indicate benefits such as:

The formula for ROI

The ROI formula is relatively simple:

The values in this formula include:

What kind of ROI is good?

Good ROI varies depending on the type of investment and the specific industry. In the case of ERP, achieving a positive ROI after just a few years after implementation can be considered a good result. In general:

The typical payback period for ERP systems is 2 to 5 years, and an ROI of 20-30% per year is often considered a good result.

How much does ERP cost?

ERP implementation costs can vary widely and depend on many factors, such as:

Size of the company - larger companies require more advanced systems.
Functionality of the system - the more modules and integrations, the higher the price.
Licenses - the cost of purchasing licenses (one-time or subscription).
Implementation costs - include installation, configuration, data migration, and employee training.
System maintenance - ongoing updates, technical support, and server costs.

The cost of ERP for a small company can range from tens of thousands of zlotys to millions of zlotys for large corporations.

How to calculate the ROI of ERP?

Calculating ROI from ERP requires considering both the cost of the investment and the benefits the system brings to the company. The key steps are:

Determine the investment costs

The sum of all ERP-related expenses, including:

2. Identify the benefits

Benefits can be divided into:

4. Determine the payback period

Analyze how long the benefits achieved will outweigh the investment costs. For example:

The savings can offset the cost in the second year, and the ROI will be positive.

4. Consideration of additional factors

It is also worth considering intangible benefits, such as improved team morale, better interdepartmental cooperation, or increased compliance.

ROI is a key indicator that allows entrepreneurs to assess the profitability of investing in an ERP system. Calculating ROI requires considering all the costs associated with implementing and maintaining the system and the financial benefits it brings. A well-planned ERP implementation with a positive ROI improves a company’s operational efficiency and increases its competitiveness in the market.

articles Business knowledge

What is the debit note (accounting note), and how do you issue it?

Post author By Maksymilian Śniegocki
Post date December 12, 2024

Table of content

What is a debit note?
How to issue a debit note?
Debit note – sample
Is the debit note an expense?
When is a debit note a tax expense?
Debit note vs. invoice – application
Correction of a debit note – what should be kept in mind?

A debit note, also known as an accounting note, is an accounting document. Unlike invoices, it does not document the sale of goods or services but is used for billing in other cases, such as charging additional fees or charging a counterparty for costs related to a contract. In this article, we will explain what a debit note is, how to issue it, and its use in business and tax practice.

What is a debit note?

A debit note is an accounting document used for financial settlements between counterparties in situations that do not require an invoice. It is used when charging costs not directly related to the sale of goods or services. The note allows you to document additional financial receivables or liabilities formally.

When is a debit note used?

The debit note is used in situations such as:

Charging a counterparty with additional costs, such as for a delay in the execution of a contract,
Charging contractual penalties,
Settlements resulting from cost sharing, e.g., shared office rental,
Charging for transportation or return of goods,
Re-invoicing of expenses that are not subject to VAT (e.g., postage).

How to issue a debit note?

Issuing a debit note does not require using a unique accounting program – it can be drawn up manually or in any word processor. However, the note must meet specific formal requirements.

Elements of a debit note:

Heading of the document - Marked “Debit note” or “Accounting note.”
Date of issue - The date of preparation of the document
Document number - A unique sequence number that allows identification of the note
Data of the parties: Data of the issuer (name, address, TIN), data of the recipient (name, address, TIN)
Description of the object of the debit - A detailed description of the reason for issuing the note (e.g., contractual penalty for late performance of a service)
Amount of the debit - Value expressed in currency, usually in zlotys
Signature of the issuer - Optional signature of the person responsible for issuing the note

Debit note - sample

Below is a sample sample of a debit note:

DEBIT NOTE NO. 01/11/2024

Date of issue: 04.11.2024

Issuer: XYZ Sp. z o.o., ul. Przykładowa 1, 00-001 Warsaw, NIP: 123-456-78-90

Recipient: ABC S.A., 10 Testowa Street, 00-002 Kraków, NIP: 987-654-32-10

Description: Charge for untimely implementation of the agreement by paragraph 10 of the contract no. 123/2024 dated 01.01.2024.

Amount: 5,000.00 PLN

Signature:

[Name of issuer].

Is the debit note an expense?

A debit note is not a document confirming a cost within the meaning of tax regulations. However, if it meets the criteria for a deductible expense, it may become the basis for accounting for costs in certain situations.

When is a debit note a cost?

When is a debit note a tax expense?

A debit note must meet the requirements of the Corporate Income Tax Act (CIT) or the Personal Income Tax Act (PIT) to be considered a tax expense.

Examples of situations in which a note can be a tax expense:

Charging a contractual penalty - If a company is penalized for failure to perform a contract on time, and the penalty arises from the contract, it can be included as an expense.
Reimbursement of shared office expenses - A note for sharing rental costs can be the basis for including the payment as an expense.
Transportation costs - When the note documents sharing the cost of transporting goods between contractors.

Remember that the debit note must be appropriately documented and by the regulations.

Debit note vs. invoice - application

A debit note differs from an invoice in that it does not document the sale of goods or services. It is also not an accounting document required for VAT settlement. A debit note is used in situations where an invoice would be an inappropriate accounting tool.

Examples of differences:

Correction of a debit note - what should be kept in mind?

Correction of a debit note may be necessary in case of errors in the amount, counterparty data, or other document elements. In the case of a correction, a new document that refers to the original note should be issued.

What should a note correction contain?

A debit note is a valuable tool in financial settlements between counterparties in situations that do not require an invoice. Its proper drafting allows the formal documentation of additional receivables or costs. Although the note does not report transactions subject to VAT, it can be considered a tax expense if it meets certain conditions. Entrepreneurs should remember to draft and make correct notes to avoid billing problems.

articles Business knowledge

Direct and indirect costs – definition, examples, differences

Post author By Maksymilian Śniegocki
Post date December 5, 2024

Table of content

What are direct and indirect costs?
Indirect costs – examples
Direct costs – examples
Indirect and direct costs – differences
Direct and indirect costs in CIT accounting

Costs are an integral part of any business activity. They are divided into various categories that help manage the company’s finances and determine its profitability. Direct and indirect costs are of particular importance. Understanding these concepts and properly distinguishing between them is crucial in managing a company’s finances and in tax settlements such as CIT. In this article, we will discuss the definitions, examples, and differences between these categories of costs and their role in tax accounting.

Direct and indirect costs are two basic types of costs that differ in how they are attributed to a specific activity, product, or service. Direct costs can be linked to a particular project or product, while indirect costs are more difficult to attribute because they relate to the general operation of the company.

Distinguishing between these costs is essential in budget planning, profitability analysis, and tax preparation.

What are direct and indirect costs?

Direct costs are expenses that can be precisely attributed to a specific product, service, project, or order. They arise solely in connection with a particular production process or the performance of a particular service.
Indirect costs are expenses that relate to the operation of the entire enterprise or its larger parts but cannot be clearly attributed to a single product, service, or project. Typically, these are costs related to the general operation of the company, such as office rent or management salaries.

Indirect costs - examples

Indirect costs are related to the company’s maintenance and involve general resources not assigned to a specific project or product. Examples of such expenses include:

Administrative costs: Office staff salaries, purchase of office supplies, accounting services.
Rent and operating costs: Office rent and utility charges (electricity, water, gas) for the company's building.
Management costs: Salaries for executives and management.
Marketing and advertising costs: Promotional campaigns, advertising agency services.
Depreciation costs: Depreciation of buildings, machinery, and office equipment.
Insurance costs: Insurance policies for the entire company.

Direct costs - examples

Direct costs are related to specific operating activities of the company and are easily attributed to individual products or services. Examples of direct costs are:

Material and raw material costs: The purchase of raw materials used in production (e.g., steel in car manufacturing, flour in a bakery).
Direct labor costs: Wages and salaries for production workers or those providing specific services.
Tool and machinery costs: Use of production machinery assigned to a specific project.
Transportation costs: Transporting goods to the customer if directly related to a particular order.
Costs of licenses and patents: Payments for rights to technology used to produce a particular product.

Indirect and direct costs - differences

Direct costs can be clearly attributed to a specific product, service, or project. Indirect costs are not connected to a single product—they are related to the company’s general operation.

Examples of costs:

Impact on the price of the product

Direct costs directly affect the calculation of a product’s unit price. Indirect costs, on the other hand, are included in the company’s overall budget and can be accounted for through the adopted cost allocation methods.

Application in management

Distinguishing between direct and indirect costs allows the company to control the profitability of individual projects better and identify areas for optimization.

Direct and indirect costs in CIT accounting

In the context of corporate income tax (CIT), allocating costs to direct or indirect categories is crucial. Here are the main principles:

Direct costs: These costs are directly related to the revenues earned in a given accounting period and should be allocated to the same tax year in which the corresponding revenues were earned. An example would be the purchase of raw materials to produce goods sold in a specific year.
Indirect costs: Indirect costs are not assigned to a specific revenue and are accounted for as they are incurred. This applies to fixed and general costs such as office rent or marketing expenses.

Summary

Direct and indirect costs are key expense categories in any business. Direct costs are easily attributed to a specific product or service, while indirect costs relate to the company’s overall operation. Understanding the differences between the two is essential for effective financial management and proper tax accounting, especially in the context of CIT. Correctly assigning costs to the appropriate categories allows a company to analyze profitability more accurately and comply with tax regulations.

articles Business knowledge

GTU code – what is it, what are the designations and when to use them?

Post author By Maksymilian Śniegocki
Post date November 28, 2024

Spis treści

What is a GTU code?
GTU codes – To whom do they apply?
What GTU designations are applicable?
What is the GTU code on the invoice? What should you keep in mind?
Lack of GTU designation vs. JPK correction

GTU codes are special designations intended to classify goods and services in transactions subject to VAT. They are mandatory for certain types of goods and services, and their use is intended to help tax authorities identify potentially risky areas of business activity. These codes are assigned to transactions within JPK_V7M (monthly) or JPK_V7K (quarterly), the modern tax reporting form.

GTU codes are used only for specific goods and services indicated in the regulations. They do not apply to all transactions – their application is limited to cases specified by the legislator. Any entrepreneur who sells goods or services from the GTU list must assign the corresponding code to his transaction when submitting the JPK_V7 file.

What is a GTU code?

A GTU code is a designation assigned to a specific group of goods or services that are particularly relevant from a fiscal perspective. These codes allow for detailed data analysis on sales of goods and services, making it easier for tax authorities to monitor turnover and identify potential tax abuses, such as VAT carousels.

The obligation to use GTU codes applies to transactions related to certain types of goods (e.g., fuels, precious metals, tobacco products) and services (e.g., legal, consulting, or transportation services). The GTU code does not have to be visible on the invoice but should be included in the JPK_V7 file sent to the authority.

GTU codes – To whom do they apply?

The obligation to use GTU codes applies to VAT taxpayers who sell goods or provide services covered by the obligation to mark them. Only some companies will have to use these codes, which are assigned only to strictly defined groups of goods and services.

Businesses that must use GTU codes include:

Sellers of goods covered by GTU designations, such as fuels, precious metals, excise goods, or electronics.
Providers of services listed in the regulations, including legal, consulting, or transportation services.
If a business does not sell goods or services listed in the GTU, it is not required to use these codes in its VAT returns.

What GTU designations are applicable?

GTU codes are divided into 13 groups, each corresponding to certain goods or services. Here is the list of applicable GTU designations:

GTU_01 - Beverage motor fuels and their derivatives, heating oils.
GTU_02 - Energy products, such as coal and coke.
GTU_03 - Lubricating oils and lubricating preparations.
GTU_04 - Tobacco products, e-cigarette liquids, dried tobacco.
GTU_05 - Waste and secondary raw materials (e.g., scrap metal).
GTU_06 - Precious metals and goods made from them.
GTU_07 - Electronics (e.g., phones, computers, cameras).
GTU_08 - Vehicles and their parts that are subject to VAT.
GTU_09 - Medicines and medical products that may be traded for reimbursement.
GTU_10 - Buildings, structures, and their parts.
GTU_11 - Legal services.
GTU_12 - Consulting services.
GTU_13 - Transportation and warehouse management services.

Entrepreneurs should carefully check whether their business involves the sale of goods or provision of services from the above list to mark transactions correctly.

What is the GTU code on the invoice? What should you keep in mind?

Although the GTU code does not have to be visible on the invoice itself, it is essential for reporting within the JPK_V7 file. In practice, the entrepreneur should ensure that the accounting system or invoicing software allows the appropriate codes to be assigned to transactions.

Here are some critical rules regarding GTU codes on an invoice:

GTU codes vs. customer - The GTU code is an internal designation of the taxpayer that does not need to be shared with the contractor.
Cooperation with the accounting office - If a business uses an accounting office, it should provide invoices with GTU designations or information on the type of goods and services covered.
Correctness of data—Entering an incorrect GTU code may require a correction of the JPK.

Lack of GTU designation vs. JPK correction

Incorrect GTU designation or its absence in the JPK_V7 file can lead to errors in tax reporting. If a JPK file is found to have been sent with an incorrect GTU code, the entrepreneur must file a correction.

JPK correction due to a missing or incorrect GTU designation should be done as soon as possible. To avoid problems, entrepreneurs should:

articles Business knowledge

Correction note – what it is and who issues it

Post author By Maksymilian Śniegocki
Post date November 21, 2024

Spis treści

What is a correction note?
Correction note – what is it used for?
Who issues the correction note?
Correction note – what must it contain?

A correction note is a tool used to correct minor errors on invoices. Although most often used by invoice recipients, a correction note is a document that requires the invoice issuer to agree to make changes. Here, we discuss exactly what a correction note is, what functions it performs, who can issue it, and what elements it must contain.

A correction note is a document that allows you to correct minor mistakes on an invoice. It is an alternative to the correction invoice, which the seller issues in case of more serious errors, such as an incorrect amount of tax or inaccurate value of goods. The correction note is often used when the invoice contains minor errors in formal data, such as typos in the contractor’s name, an incorrect address, or a VAT number.

Unlike a correction invoice, which the seller issues, a correction note is issued to the recipient, i.e., the buyer. Thus, it is a tool that allows you to quickly and easily correct an invoice without involving the issuer in correcting formal errors.

What is a correction note?

A correction note is a document that corrects incorrect formal data on an invoice. In the case of minor mistakes, such as a wrong address, VAT number, or a typo in the company name, the buyer of goods or services has the right to issue a correction note and send it to the invoice issuer. This avoids issuing a correction invoice involving a more complex accounting process.

The correction note allows you to correct such elements as:

Note that a correction note is not a document that corrects values on an invoice. It cannot be used to correct such elements as unit price, quantity of goods, gross value, or VAT amount. A correction invoice is used for such corrections, which the seller must issue.

Correction note - what is it used for?

The correction note is used in situations where there are minor formal errors on the invoice that do not affect the amount of the transaction or the value of the tax. It is a document that aims to keep financial records in order while making life easier for both parties to the transaction. Correction notes allow you to easily and quickly correct errors that could lead to misunderstandings or problems during a tax audit.

In practice, the correction note is a convenient solution, as it can be a simple process of correcting the entire document. Its issuance is relatively simple, and it is possible to avoid re-generating the invoice.

Who issues the correction note?

The correction note is issued by the recipient of the invoice, i.e., the buyer of goods or services. It is worth noting that the seller cannot issue a correction note. If the seller notices errors on the invoice that cannot be corrected with a correction note, he must issue a correction invoice.

The procedure for issuing a correction note is as follows:

The buyer notices an error in the invoice that can be corrected with a correction note (e.g., a mistake in the address or VAT number).
The buyer issues a correction note indicating the erroneous information and the correct version.
The correction note is then sent to the seller, who should accept it and acknowledge receipt.

Although the seller’s acceptance of the correction note is not formally required, it is recommended from the legal and accounting security perspective. Confirmation of acceptance of the correction note can be done electronically, for example, by email, which facilitates the workflow process.

Correction note - what must it contain?

For a correction note to be a valid and formally correct document, it should contain certain elements. The essential elements that must be included on the correction note include:

Date of issue of the correction note - Each note should be dated clearly to indicate when it was issued.
Correction note number - Each note should have its own individual number. Numbering can be done in any way, but it must be consistent and allow for document identification.
Purchaser's data - Full name of the purchaser, address, and Tax Identification Number.
Seller's data - The seller's full name, address, and Tax Identification Number.
The number of the invoice to which the correction note relates - The note must indicate the number of the invoice being corrected so that the documents can be unambiguously linked.
Description of the error - The correction note should specify exactly what is wrong with the invoice and indicate the correct version of the information.
Signature of the person issuing the note - Although formally, the signature is not required, it is worthwhile that an authorized person sign the correction note for the security of the document and compliance with internal regulations.

articles Business knowledge

Production planning programs – how to choose the right solution?

Post author By Maksymilian Śniegocki
Post date November 14, 2024

Table of content

Production planning software – the principle of operation
Features of a good production management program
Production planning software – solutions available on the market
What should you look for when choosing a system for production?
Production planning programs – what to choose?

Choosing the right production planning program can significantly affect the efficiency of a company’s production processes. A well-chosen system allows for better work organization, resource optimization, and reduction of production costs. Before choosing the right program, it is worth analyzing your company’s specifics and needs. Is it mass production, unit production, or perhaps of a project nature? What are the main challenges they face? What functions will be necessary for daily tasks?

The next step is to determine the budget and expected implementation time. Some systems, especially the more complex ones, require a more extended implementation period and human resource commitment. It’s also worth consulting other company departments—for example, IT and finance—to assess whether the company has sufficient resources to support the implementation and whether the system is compatible with other tools used in the company.

Production planning software - the principle of operation

Production planning programs are designed to streamline and automate production management processes. Their primary operating principle is based on collecting and analyzing data on production, resources, orders, and time. Based on this data, the system creates a production schedule that considers all essential aspects, such as the availability of machinery, raw materials, employees, and order deadlines.

These systems can operate in real-time, allowing production plans to be monitored and updated according to the current situation. An example would be if one of the critical raw materials is unavailable – the program automatically adjusts the schedule so that production can run smoothly.

Features of a good production management program

Good production scheduling software should meet several basic requirements to support production process management effectively. Among the most important features are:

Intuitiveness and ease of use - The program should be easy to use so that even people not directly involved in IT can use it. An intuitive interface allows employees to be trained faster and minimizes the risk of errors.
Flexibility and scalability - It is worth choosing a system that can be customized to meet the company's individual needs and that will grow with the business. Scalability is essential if the company plans to increase production.
Integration with other systems - Good software should be able to integrate with different tools, such as ERP (Enterprise Resource Planning), CRM (Customer Relationship Management), or SCM (Supply Chain Management) systems, to enable a smooth flow of information.
Analytical functionalities - Production management software should allow data analysis and reporting, facilitating better decision-making and quick response to changes.
Technical support and upgrades - The system should be updated regularly, and the vendor should offer technical support to solve problems quickly.

Production planning software - solutions available on the market

There are many production planning solutions available on the market, which differ in functionality and the way they work. Depending on the size and needs of the company, one can choose ERP-type programs such as SAP, Microsoft Dynamics 365, or Oracle, which offer extensive production management modules and can be tailored to the company’s specific requirements.

APS (Advanced Planning and Scheduling) systems are also available for companies looking for more specialized tools, such as Preactor or Asprova. These advanced solutions focus mainly on optimizing production schedules and managing resources.

What should you look for when choosing a system for production?

Choosing the right production scheduling software requires considering several vital aspects:

Specificity of production - Not all software is universal. It is advisable to choose a solution dedicated to the specifics of the company's industry, as this will allow for more precise management of production processes.
Costs - Purchase and implementation costs can vary depending on the sophistication of the system. The cost of the license, training employees, and ongoing maintenance of the system should be considered.
Ability to integrate - The program should cooperate with other systems used in the company. Lack of integration can lead to problems with information flow and slow processes.
Technical support and availability of updates - A good software provider should provide technical support to resolve any problems that may arise quickly and regular system updates.
Data security - The system should provide adequate protection, primarily if the company processes sensitive production or customer data.

Production planning programs - what to choose?

The right production planning program should depend on the company’s size, specifics, and business goals. Small companies often need more straightforward production planning and monitoring systems without significant investments. For larger manufacturing companies that need to manage complex processes, sophisticated ERP or APS systems will be a better choice.

OptiFlow - Production Planning

Check out the artificial intelligence production planning solution from INLOGICA!

articles Business Central Business knowledge Recommended

Business Central Team Members License – A cost-effective solution for teams ready for the challenge!

Post author By Maksymilian Śniegocki
Post date November 14, 2024

Table of content

Business Central Team Member – It has more features and less paperwork
What possibilities does the Business Central Team Members license offer?
Why choose the Business Central Team Members license?

Business Central Team Member - It has more features and less paperwork

Are you looking for an effective and affordable way to engage more employees with Business Central? This license is an excellent option for you. It’s worth noting that it’s not the same as the Dynamics 365 Team Members license – as it offers a unique set of features tailored to tasks that support teams’ daily work.

What possibilities does the Business Central Team Members license offer?

Broad access to data: Users can freely read data in Business Central, facilitating the efficient flow of information.
Update critical information: The license allows users to update existing data, such as payment deadlines or contact information for customers and suppliers. This allows the team to respond quickly to ongoing changes without involving other users.
Approving and rejecting tasks: Team members can approve or reject tasks within workflows assigned directly to them. This solution streamlines decision-making processes and allows them to focus on priority activities.
Flexibility in sales and purchase offers: Users can create, edit, and delete sales and purchase offers, enhancing their role in the sales process while better managing daily transactions.
Handling personal data: The ability to create, edit, and delete personal data gives companies confidence that their database is always up-to-date and complies with legal requirements.
Editing timesheets: Team members can submit their timesheets for approval. This simplifies time management and optimizes the work recording process.
Integration with Power Apps and Power Automate: The license allows you to use Dynamics 365 Power Apps and Power Automate to automate processes and create simple applications to support your team's work.
Customization: The module can be extended with additional tables (up to 15), which can be used to customize the system further to meet your team's specific needs.

Why choose the Business Central Team Members license?

The Business Central Team Members license is the ideal solution for companies that want to involve a wider team in working with the ERP system. It provides access to key features while maintaining full control over permissions. With this license, a company can take full advantage of Dynamics 365 Business Central without incurring high costs.

By opting for Business Central Team Members, you invest in efficiency, control, and scalability – a solution ideal for modern teams.

Ask our expert for details: https://inlogica.com/en/microsoft-products/microsoft-licenses/

articles Business knowledge Dynamics 365/AX Recommended

Final consultations for e-Invoices (KSeF)

Post author By Maksymilian Śniegocki
Post date November 8, 2024

Spis treści

What solutions does the Ministry propose?
Key Changes in KSeF
New e-Invoice Structures – what and when.

What solutions does the Ministry propose?

The Ministry of Finance has announced the launch of final consultations on implementing the mandatory National e-Invoice System (KSeF). The draft’s work considers the specifics reported by Local Government Units (LGUs) and entrepreneurs’ demands. Comments on the draft law can be submitted until November 19, while business solutions can be submitted until November 22.

Key Changes in KSeF

Phased Implementation of KSeF:

Transition Period:

Support for the “digitally excluded”:

New e-Invoice Structures - what and when.

The proposed changes also apply to the structure of e-invoices. The modifications are expected to streamline the process of marking up TSU invoices, allow the addition of attachments, and introduce a new “employee” role. The latest FA (3) and FA_RR (1) structure will be effective from 2026, with the final version to be implemented before the mandatory KSeF.

This consultation is a crucial step to ensure the quality of solutions before the system is implemented.

Get ready for KSeF!

Check out the solution for KSeF from INLOGICA for Microsoft Dynamics 365/AX systems.

articles Business knowledge

Advance payment invoice vs. final invoice – differences, application

Post author By Maksymilian Śniegocki
Post date November 7, 2024

Table of content

Advance invoice vs. final invoice – differences, application.
What is an advance invoice used for?
Final invoice – the most critical information
Advance payment invoice and VAT
What are the differences between the advance payment invoice and the final invoice?
When to issue a final invoice?

The advance and final invoices are two documents that play a crucial role in business transactions. Although both relate to sales transactions, their purpose, application, and detailed information differ. This article will look at these differences and the uses of both types of invoices.

Advance invoice vs. final invoice - differences, application.

An advance invoice is a document a seller issues when he receives an advance payment for a future transaction. It is a form of payment confirmation that usually does not complete the transaction, but it is the first step in its implementation. On the other hand, a final invoice, also known as a sales invoice, is issued at the end of a transaction when the delivery of goods or services has already been completed, and the total amount to be paid is known.

The main differences between the two types of invoices are the timing of their issuance, the data they contain, and the function they perform in the sales process.

What is an advance invoice used for?

The advance invoice is designed to document the buyer’s advance payment. It is used in cases where the transaction is carried out in several stages or when the value of the service or goods is significant and requires an advance payment before delivery. With an advance invoice, the seller has formal confirmation of receipt of the advance payment, which facilitates subsequent settlement and provides assurance that the transaction is secured.

The advance invoice is also essential for the buyer, as it is a document on which he can claim a VAT refund if the seller fails to fulfill the contract.

Final invoice - the most critical information

The final invoice is a document that summarizes the entire transaction, including the goods or services supplied and the final amount to be paid. It contains all the necessary information, such as the details of the seller and buyer, a description of the goods or services, unit prices, VAT rates, and the due date.

The final invoice should be issued at the end of the transaction after the delivery of goods or services has been completed. It is a crucial document for both parties to the transaction, formalizing all obligations and confirming the performance of the contract.

Advance payment invoice and VAT

The advance invoice impacts VAT settlement. When an advance invoice is issued, the seller is obliged to pay VAT on the value of the advance. This means the seller should show this VAT in his tax return, even if the total transaction still needs to be completed.

On the other hand, in the case of a final invoice, VAT is settled on the total value of the transaction, considering the previously reported VAT from the advance invoice. In practice, if the buyer has made an advance payment, the VAT from this advance payment should be deducted from the VAT shown on the final invoice.

What are the differences between the advance payment invoice and the final invoice?

The main differences between an advance invoice and a final invoice include:

purpose: an advance invoice documents an advance payment made by the buyer, while a final invoice summarizes the entire transaction.
the time of issuance: The advance invoice is issued before the transaction is completed, while the final invoice is issued after the transaction is completed.
the information in the document: the advance invoice contains information on the advance payment, while the final invoice includes complete details on the goods or services delivered and the final amount to be paid.

When to issue a final invoice?

The final invoice should be issued after the completion of the transaction, that is, after the delivery of goods or the performance of services. The final invoice must contain all relevant information, such as:

If the transaction was completed in several stages, the final invoice should consider any advance payments previously made by the buyer.

In summary, the advance and final invoices are vital in the business process. Understanding and correctly issuing them is essential for any organization to manage its finances and effectively meet its tax obligations.

articles Business knowledge Recommended

VAT in the Digital Age: ViDA package approved

Post author By Maksymilian Śniegocki
Post date November 6, 2024

Table of content

What does the ViDA (VAT in the Digital Age) package mean?
How is it worth preparing for this?
ViDA Package Implementation Schedule

What does the ViDA (VAT in the Digital Age) package mean?

On November 5, 2024, at the ECOFIN (Economic and Financial Affairs Council) meeting, EU member states voted on new VAT regulations. This package includes three main areas of change:

Digital VAT Reporting:

Changes in the Digital Platforms Area:

Single VAT Registration (SVR):

How is it worth preparing for this?

These changes will come into effect gradually. It is worth thinking about a partner who will take care of:

ViDA Package Implementation Schedule

These changes may require your company to prepare for the new legal and technical requirements. Plan to implement the necessary solutions to help you adapt to the new tax reality.