So I have a client. They have engaged a third party to produce and fullfill merchandise on their behalf. In this arrangement, the 3rd party does all the work and takes 20% of the net profit. The 80% remainder is for the client who invoices for this amount to the 3rd party when the figures are provided.
Here's the fun bit.
The 3rd party are meant to supply the remittances of all sales, cost and profit on the first of the following month. This also includes the profit split where the client can invoice the remaining 80%. The 3rd party has not been supplying the remittances needed to raise the invoices for months at a time, ignoring requests from the client. Once the invoices are raised, even though they are late, they enforce 30 day payment terms as per the contract, and even then, they pay late.
Now, everything after the invoice has been issued, sits with credit control and is all fine in terms of process. However, where do we stand with the delay to provide the information required to raise the invoice?
What has happened is the 3rd party has played this game and effectively have given themselves a 6 month payment term...
When the remittance is 3 months late, they still insist on the 30 day payment terms for the most recent invoice.
Is there anything that can be done in these situations? I understand playing the cashflow game, but this is excessive. Is there any avenue with regards to ethics/professional standards as this is being driven by a qualified accountant.
Also, in terms of accounting, the sales were made in the in previous financial year, there is no accrual as the sales volume wasn't known, the invoice was raised in this financial year, is there any consideration needed. There is no transaction cost available to the client in the last financial year, so under IFRS 15 we can't recognise the revenue. Is that correct? Even though these numbers would have been known by the 3rd party.