Invoices to establish in France: Definition and recognition

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  1. Introduction
  2. What are invoices to establish?
  3. Why recognize an invoice to establish?
  4. How do you recognize an invoice to establish?
    1. Sale of goods
    2. Provision of services
    3. VAT recognition
    4. Practical example
  5. What should you do when the next accounting period starts?

At the end of your accounting period, you need to correctly recognize all sales and services during that period. But how do you recognize goods and services you haven’t been able to invoice? Read our article to find out more about invoices to establish and better understand how they affect your business’s accounts.

What’s in this article?

  • What are invoices to establish?
  • Why recognize an invoice to establish?
  • How do you recognize an invoice to establish?
  • What should you do when the next accounting period starts?

What are invoices to establish?

Invoices to establish are invoices a service provider has not issued at the end of its annual accounting period despite already providing goods or services. This means there is a time lag between the provision of goods or services and the billing of the purchase. The provider is responsible for issuing and recognizing the invoice to establish. You can use an invoicing solution such as Stripe Invoicing to optimize and automate your invoicing workflows–no code required.

The customer (i.e., the recipient of the goods or services) must recognize an invoice not received (FNP) at the end of their accounting period. See our article to find out more about invoices not received.

Note that all businesses can set their own date on which the accounting period ends—unless they are subject to the noncommercial profits (BNC) regime. In this case, the closing date is December 31. Learn more about dates on which accounting periods end in the article published by the French government.

Why recognize an invoice to establish?

Recognizing an invoice lets you justify the time lag between the delivery of goods or the provision of services and the issuing of the invoice while respecting the accounting principle of cutoff. This recognition is necessary when the provision of goods or services and the invoice date are in different accounting periods. By recognizing the invoice to establish, the provider confirms the delivery or provision took place in the previous accounting period.

How do you recognize an invoice to establish?

You can automate the recognition of all your invoices to establish with accounting software. Stripe’s solutions integrate smoothly with your systems to speed up your accounting entries (learn how to sync your existing tools with Stripe by visiting Stripe Apps).

You can also account for it manually. Note that invoices to establish are recognized differently depending on the type of purchase.

Sale of goods

To recognize an invoice to establish for the sale of goods, you must:

  • Debit account 4181 “Customers—Invoices to establish” (“clients—factures à établir”) by the amount of the sale, inclusive of all taxes (TTC).
  • Credit account 44587 “Turnover tax on invoices to establish” (“taxes sur le chiffre d’affaires sur factures à établir”) by the amount of value-added tax (VAT).
  • Credit account 707 “Sales of goods” (“ventes de marchandises”) by the amount of the sale, exclusive of taxes (“hors taxes,” or HT).

Provision of services

For services rendered, you must:

  • Debit account 4181 “Customers—Invoices to establish” by the amount of the sale, inclusive of all taxes (TTC).
  • Credit account 44587 “Turnover tax on invoices to establish” by the amount of VAT.
  • Credit account 706 “Services rendered” (“prestations de services”) by the amount of the services, exclusive of taxes (HT).

VAT recognition

All VAT-liable businesses are obliged to pay the VAT collected on the transaction to the tax office. To avoid penalties for late payment of VAT (while waiting for the invoice to be issued and paid), the business must record the VAT due on account 44587.

The VAT payable on the invoice to establish is recognized by:

  • Debiting account 44587 “Turnover tax on invoices to establish.”
  • Crediting account 4457 “VAT collected.”

Practical example

You physically ship goods worth €6,000 exclusive of taxes on December 30, a day before your year-end closing on December 31. VAT on the sale is set at 20%, and the invoice cannot be issued until January 1 of the following year. On the day of your year-end closing on December 31, you must take these steps to recognize the invoice to establish:

  • Debit account 4181 “Customers—Invoices to establish” by €7,200 (amount includes all taxes).
  • Credit account 44587 “Turnover tax on invoices to establish” by €1,200.
  • Credit account 707 “Sales of goods” by €6,000 (amount excludes taxes).

You must also recognize the VAT on the invoice to establish, which is payable as follows:

  • Debit account 44587 “Turnover tax on invoices to establish” by €1,200.
  • Credit account 4457 “VAT collected” by €1,200.

What should you do when the next accounting period starts?

At the opening of the next accounting period, the entries of the invoice to establish must be reversed so it is not recognized twice. This is called a reversal of entries.

To reverse the entries in the above example, you need to:

  • Credit account 4181 by €7,200.
  • Debit account 44587 by €1,200.
  • Debit account 707 by €6,000.

Once the invoice is issued, it can be recognized as usual.

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