Prepayment is an advance or deposit? Understand the concept

Prepayment is a payment made in advance and prior to the transfer of goods, as well as performing work or rendering services. The use of this type of payment helps to stabilize the relations of counterparties, to guarantee the interests of commodity owners in the unstable market conditions in the market, inflation and the crisis in the payment system.

In accordance with the Civil Code, payment by the buyer of goods must be made either before or after their receipt. In other words, the transfer of goods and their payment should be as close as possible in time. Thus, prepayment is the advance received by the seller for the planned delivery.

Kinds

In practice, it is customary to distinguish between the following types of prepayment:

- the total amount of the full amount of the expected delivery;

- partial, represented by a fixed amount or percentage, which are agreed in advance;

- a revolving prepayment is a payment made with continued cooperation. Often, this operation is accompanied by regular shipments of goods or the provision of services.

Score

An advance payment account is a document that is intended for payment of a certain product or service. This payment document is very important for both the seller and the buyer.

The form of the account form is not unified, therefore the main requirement for its registration is the reflection of the mandatory requisites that are necessary for documenting the actual sale of the goods or services.

Return

If the seller fails to provide the goods within the established time period, the buyer has the full right to demand a full refund of the advance payment. There is also another variant of interaction of counterparties - discussion with the seller of the possibility of postponement of terms and signing of an additional agreement.

In case of refusal to the buyer in the return of the advance payment, he must draw up a statement in writing addressed to the seller. In this document, the name of the goods, the prepayment and the specified delivery time must be indicated. In the application, you can specify the amount of penalty that the seller must pay for violation of consumer rights. The application is made in two copies, one of which is transferred to the seller for signature.

If these claims are not considered by the seller for ten days, the buyer has the full right to apply to the court with a statement of claim on this issue.

Full prepayment

Increasingly, with the interaction of business entities in the modern market, the concept of "100% prepayment" is used. This is an advance payment in full for the planned delivery of the goods.

This form of payment is quite successfully used when making purchases through 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 100% prepayment. This in the modern market of services involves a certain risk, since many cases when, having received an advance in the amount of the value of the goods, the seller simply disappears.

When using this type of payment often works a good system of discounts. It should also be noted that in other states, prepayment is quite successfully used - it is a highly effective tool that stimulates the development of market relations. At the same time, counterparties in this case are treated with understanding and trust to each other.

Benefits from advances

The benefit from advances is a relatively relative concept, since the business entity that received an advance payment still needs to fulfill the obligations fixed by the contract (to do the work or ship the goods). Therefore, you can talk about income only after the actual completion of this interaction.

With full or partial refusal of the enterprise to fulfill its obligations, such an advance will have to be returned.

Thus, prepayment to suppliers is an advance paid for the future delivery of goods. Sometimes the seller can change his mind. In this case, the service does not turn out (the goods remain in the warehouse with the supplier), and the money is returned to the buyer.

Advance payment, down payment and deposit: some differences

In this article, both concepts have been 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. It is assumed that the process of manufacturing and supplying goods or performing works (providing services) does not depend on this payment.

Advances are made against future deliveries. Often, these funds can be used to manufacture the product, which in the future will be delivered to the subject who 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 advance payment can be called an advance. However, in tax and accounting, there is no emphasis on the fundamental differences between these concepts. It should also be noted that in the legislation these terms are found as synonyms.

In this case, the prepayment and advance payment should not be confused with the deposit. Often in the legislative acts, the definition of the last term misleads business entities. And yet, the deposit is the amount of money that is issued by one contractual party of another as evidence of the conclusion of some contract. This concept serves to ensure the implementation of this treaty.

If the parties fulfill their own obligations without problems, the deposit may be identified with an advance. However, if there are at least the slightest violations of the obligations of either party, the difference between a deposit and a prepayment immediately becomes clear. So, if there is a failure to fulfill obligations on the part of the subject who gave the deposit, he remains with his counterparty (who received this amount). In case of a breach of obligation on the part of the recipient, he must return the deposit to the seller in a double amount.