Clause 8e of the code of conduct sets out the requirement on an adviser to, each time a fee is payable, provide the client with an invoice containing a full description of the services that the invoice relates to. The code of conduct does not prescribe any particular requirements on advisers regarding the issuing of receipts.
Issues that have been identified in this area of professional practice include advisers:
A fee only becomes payable once it has been contractually agreed to (i.e. an invoice cannot be issued until after the client has accepted a written agreement). An invoice notifies the client of their obligation to make payment.
An invoice therefore should only be issued after receiving the client’s written confirmation of the payment terms and conditions, even if the first instalment becomes payable upon acceptance of the written agreement.
A written agreement cannot act in place of an invoice.
If payments are due in instalments, then the adviser must issue an invoice for each instalment as it becomes payable at the contractually agreed time. A single invoice for the entire fee does not meet the requirements of clause 8e of the code of conduct. For example, a written agreement may set out the total fees that are expected in three separate instalments:
A separate invoice should be issued at each stage. As with any other amendments, if there are subsequent changes to the instalment amounts and/or payment terms, this should be recorded and agreed in writing with the client in line with clause 1.5e of the code of conduct.
However, if an invoice is provided to the client for X amount at the time the application is lodged, for example, and you and your client set up a payment plan so that X amount can be paid to you in weekly instalments until it is paid off, there is no requirement to issue invoices for each of these weekly instalments. The time at which X amount was payable was set out in the written agreement as the date of lodgement and the issuing of a single invoice for X amount at this time and then allowing payment of this invoiced amount by instalments does comply with clause 8e.
The Authority recommends that the following items be included on all invoices:
The difference between an invoice and a tax invoice involves the charge of New Zealand Goods and Services Tax (GST).
If an adviser is charging GST, they must be GST registered with the Inland Revenue Department (IRD).
Advisers who are GST registered can charge GST at zero percent in some situations. This is known as ‘zero-rated GST’. Some examples include:
Advisers should contact the Inland Revenue Department (IRD), or an accountant, for professional advice if they are unclear about their compliance with GST requirements.
Advisers can choose the method that they use to record invoice information into the accounting system that they use.
In all situations however, the adviser must enter the following details into whichever accounting system they use, in order to be able to track all of their transactions under the requirements of clause 3e of the code of conduct:
There must be a direct correlation between all work done and all transactions undertaken, and through reconciliation, the records must match the bank statements.
If the adviser has a client account, these details must also be recorded in the client account ledger.
Clause 3e of the code of conduct also requires that such records be kept for a period of seven years and be made available to the Authority for inspection, on request.
As a matter of best practice, the Authority recommends that each time a payment is received from a client, the adviser provide the client with a receipt clearly indicating which invoice(s) the receipt relates to. This is particularly recommended if an adviser receives cash payments.
The table below sets out the difference between an invoice and a receipt:
If an adviser receives a payment in advance of it being payable and invoiced, they may wish to issue a receipt for the payment at the time they receive it and enter it into the client account. An invoice will then be issued to the client when the money becomes payable according to the payment terms and conditions in the written agreement and the money can then be transferred to the practice account.