What is a “deposit” and how to implement it?
The deposit represents the partial payment of an amount due following an agreement between two parties. The introduction of the deposit, or down payment, assumes that the contract is concluded between its parties. Both parties are obliged to keep their commitments and may be ordered to pay damages in the event of withdrawal. For example, in hotels, payment is partially made when booking rooms..
Reimbursement of a deposit is only possible if the seller does not respect his main commitment. The seller must therefore return the sums collected and offer compensation dictated by a judge so that it is done amicably
What is a deposit for?
Setting up a deposit initially allows you to guarantee a sale or the completion of a service because it commits both parties financially. Secondly, the deposit allows payments to be spread out for the customer, which promotes better cash flow management and reduces the risk of non-payment. Finally, it allows sellers to anticipate certain expenses (purchases of materials, etc.) and thus avoid cash flow difficulties.
How to set up a deposit?
A deposit is defined by signing a deposit invoice. The latter is a document attesting to the partial payment of an amount of the sale before the contract is exercised. The deposit invoice is subject to the legal framework of invoicing, it must therefore contain:
- The whole identity of the selling company
- The number and date of the deposit invoice
- The customer contact details
- The sold products and services sold
- The total amout to be paid
- Payment terms and penalties in the event of delay
- The total amount of the paid in deposit
- Total sum owed
Difference between deposit & down payment
The down payments represents the sums paid in advance for the purchase of goods or the provision of services. Unlike the deposit, the customer can revoke this agreement, however in the event of cancellation, the amount paid will be lost (unless the contract provides for the possibility of reimbursement of the down payments). If it is the seller who does not provide the products or services paid for with the down payments, he will have to reimburse double the amounts to the customer.