To ensure the reliability of a customer or to work with serenity, it is common to ask for an advance on the total cost of the work or the sale. This partial payment can then take the form of a deposit.
The first payment to be credited against the amount of an invoice, this type of advance involves a commitment from the customer and the seller. So what is a down payment? What is it for? What is its amount? We take stock.
What is a deposit?
Definition of the deposit
The deposit is a payment that occurs at the conclusion of a sale between a buyer and a seller. It represents a part of the total cost of the transaction and is carried out when signing the sales contract.
This sum implies a firm and definitive commitment from both parties. From the moment this first payment is made, neither the seller nor the buyer can reverse their decision. The customer agrees to pay for this product, the work or the service, and the seller agrees to provide it (s).
When is it paid?
The deposit must be mentioned in the sales contract, the order form, and the estimate. Otherwise, if the mention of “deposit” is not indicated, the money paid will be considered a deposit.
This first payment can be paid when signing the estimate or at the start of the site, in the case of work. This advance can also be divided into several payments.
For example, one before the signature of the estimate and another at the start of the work.
Good to know: Please note, this should not be confused with the down payment on salary. The latter constitutes part of the salary for work already carried out (different from the salary advance). It is a right for any employee who requests it.
Also Read: What Is A Blockchain?
What is it used for?
You should know that the deposit is not obligatory. However, it allows you to work with more serenity since this advance:
- Constitutes a guarantee: you guarantee that your customer will not abandon his purchase by requesting an advance. The deposit entails a firm commitment. The buyer must go through with the purchase, and the seller must deliver the goods as planned;
- covers the costs incurred and thus avoids holes in the cash flow;
- Reduces the risk of non-payment: By asking the customer to make a deposit, you ensure the latter’s creditworthiness at first and allow them to spread their payments and thus manage their finances efficiently.
The down payment calculation
As a rule, professionals ask for a 30% advance, but this is not a requirement. It is perfectly possible to ask for less or more.
But be careful not to scare the customer by asking for too high an amount. The Force Ouvrière Consommateurs association advised not to exceed 10% of the total sale price for calculating the deposit.
Note that this amount of money paid in advance must be the subject of a separate deposit invoice. Indeed, in accounting, it is considered a collection.
Also, note that you can cash this payment before the start of the work to order the necessary materials.
Also Read: What Is Phishing?
Is a deposit refundable?
This sum of money is indeed refundable in several cases:
The seller fails to fulfill his obligation: he must then reimburse the deposit. Compensation can also be added to this first payment. It is determined amicably or by justice.
Despite a letter of formal notice and the setting of a new deadline, the work does not start; despite a letter of formal notice and the setting of a new deadline: the customer may also claim the return of his advance.
Indeed, the seller cannot keep the deposit for more than three months, in which case he is forced to pay interest calculated at the legal rate.
You should also know that the law provides a withdrawal period of 10 to 14 days for certain activities. During this period, the customer is entitled to review his decision and cancel the contract. The advance is then reimbursed.
If the activity is not subject to this withdrawal period, the customer cannot reverse his decision once the estimate has been signed.
The only exception: an external event , unpredictable and beyond his control. For example, the refusal of a bank loan, the refusal of a building permit, etc.
Non-refund of the deposit
Apart from these cases, it is not possible to cancel an estimate signed with a deposit, and therefore this sum of money is not refundable.
The seller is under the obligation to ensure the delivery of the product, the site and the works, and the buyer is under the obligation to pay the sum agreed in the signed estimate, under penalty of having to pay damages in both cases. And interest.
In the event of a dispute, it is possible to appeal to a mediator or a court conciliator to settle the disagreement amicably. If this is not possible, the seller and the buyer can then take legal action. It is the district court, or high court seized, depending on the amount of the dispute.
Also Read: What Is Google Pay?