Every accountant, administrator or bookkeeper experiences it at some point: a dispute over an invoice. Often this concerns price agreements not honoured, quotes that were too low, too much cost adjustment after the fact, or unagreed additional work. In the worst case, the client decides not to pay the invoice at all. We have therefore distilled 10 lessons about invoices from recent case law, so that you as an accountant can prevent these mistakes in the future.

If accountants see no other way out, they can choose to seek a ruling in their favour from the court. If the court hands down a favourable judgment, the accountant can use this enforceable title to seize the debtor’s bank accounts in order to still enforce payment of the invoice (and the additional costs incurred in the meantime). In practice, however, accountants regularly get caught up in disputes and proceedings over invoices.

1. Specify and substantiate your invoices

Case:
The accountant had entered into an agreement with the client, under which the accountant undertook to complete the client’s bookkeeping for the year 2018 and to carry out the bookkeeping and year-end work for 2019.

Completion of the 2018 annual accounts would initially be done free of charge. But after analysing the client’s bookkeeping, the accountant found that significantly more time was needed to complete the annual accounts. The parties ultimately agreed that the firm would charge the extra work on the basis of ‘cost adjustment at a moderate rate’. The client duly paid the first invoice for this work, amounting to €9,075.00. The second invoice, amounting to €15,124.99, was not paid. This remained the case, so the accountant went to court.

The client did not pay this invoice because he felt these costs were disproportionate to the work, especially since the assignment was initially supposed to be carried out free of charge. The client also stated that the firm had never substantiated or made its invoices insightful.

Ruling:
The court ruled that “it must first be established that [the accountant] must sufficiently substantiate that she has a claim on [the client].” This also includes making clear that, and exactly which, work was performed. Especially if the client disputes the invoice. The accountant did not do this, not even before the court. The accountant therefore failed to meet her burden of assertion, so that this part of the claim cannot be awarded.

The court also noted that if the extra work were to cost significantly more than foreseen and calculated in advance (which could of course happen), the firm could not have sufficed with the mere remark that cost adjustment would take place at a reduced rate. It would have been proper for the accountant to give the client a rough cost estimate.

Of the claim of €26,961.14 for outstanding invoices, the court only awards €11,836.15.

Lesson 1: Use a cost estimate in the quotation/assignment confirmation/agreement for the assignment, as the court also notes in this case. Are you at risk of exceeding it? Inform the client in time, i.e. before you exceed the budget! The client then still has a say. In practice, the client will not stop the assignment when it is almost finished, but at least they won’t be surprised when the invoice arrives.

Lesson 2: We advise itemising the work performed by using project, time-registration and invoicing software (we use Teamleader to our satisfaction). Does the client ask, after invoicing, for a more detailed description of the time spent? Take this seriously and give the client an explanation. Good software shows a summary of the time spent on the invoice, but can also produce a further breakdown of it at the click of a button.

For more information: see also the direct link to the ruling on rechtspraak.nl

2. Fixed price agreements are fixed price agreements

Case:
Here too it concerned an accountant (this time from EY) who did not get part of his invoices paid. Accountant and client entered into an engagement agreement in 2017 for the performance of various tax services. The client wanted fixed prices, so that he would not be faced with unexpected costs. This wish of the client apparently did not stick with EY. On top of the agreed work and outside the price agreements, EY carried out further work. In total, EY sent the client four invoices: 1: on 24 May 2017 for €1,210.00, 2: on 13 June 2017 for €12,342.00, 3 and 4: on 2 March 2018 for €4,319.70 and €133,953.05. The client paid the 2017 invoices and the first invoice of 2 March 2018. Of the invoice for more than one hundred thousand euros, an amount of €56,354.57 was paid to EY; the rest remained unpaid. The client decided not to pay this amount, because in his view the work fell under the price agreements made (in the engagement agreement), or at least should have been discussed in advance for this work with extra costs. Before starting the additional remedial work, EY also had not sent a ‘statement of work’, which it normally did.

According to EY, the work did not fall under the price agreement, meaning it was entitled to invoice the work separately. EY therefore kept pressing for payment of the remainder, while the client requested (re)payment of an amount of €42,754.17 in connection with an undue payment.

EY says the work could not fall under the price agreements because it could not have been predicted in advance whether this work would be necessary and, if so, what its scope would be.

Ruling:
According to the court, the fact that the work was unforeseen does not mean it had to be invoiced separately. The engagement letter did leave room for extra work in the event of calamities, but in that case consultation with the client had to take place. It was neither claimed nor established that EY, before starting the remedial work, sought consultation with the client. The circumstances of the case in any event lead the court to largely agree with the client. As a result, EY must repay €34,040.23 to its clients. In addition, EY bears the costs of the proceedings and of the opposing party’s lawyer, together a good €6,000.

Lesson 3: Perhaps an obvious one. Do you make fixed price agreements? Then make sure this amount is not exceeded, and limit your work or contact the client. Of course, it often happens that other work is also needed besides that work. In that case, send a (written) cost estimate in advance and ask for approval. This is also advisable for substantial additional work.

Lesson 4: Are invoices not being paid? We always advise first trying to resolve it amicably by agreeing on a payment arrangement. For example instalment payments (in the case of inability to pay) or a credit note (in the case of unwillingness to pay). Once a payment arrangement has been agreed, the invoices are considered undisputed. If payment is then still not made, you have a very strong case and it is worth going to court.

Lesson 5: Even if you win a lawsuit, litigating always costs you more money than you get back in the costs award. Let alone the time and energy. Factor that in too when making a cost-benefit analysis when deciding whether to settle or proceed.

For more information: see also the direct link to the ruling on rechtspraak.nl

3. Asserting and explaining is extra important with ‘forgotten’ work

Case:
In this case, the accountant and the client had a years-long working relationship, the content of which was governed by the assignment terms agreed at the start of the collaboration. In short, it had been agreed between the parties that the ‘recurring work’, such as, among other things, preparing the profit declaration and the income tax return, would be done for a fixed amount. Work not covered by this would be charged on the basis of cost adjustment.

The collaboration went well for a long time, until an employee of the accountant concluded in August 2019 that the agreed fixed price for the recurring work, and what had been done outside of that in recent years, had rather diverged. A settlement would be prepared by the accountant to settle the outstanding amount. However, after this message, the accountant did nothing further with it, until the client terminated the assignment. In response to the termination, the accountant nevertheless sent the client an invoice of almost 4,000 euros with the description: “for work over the years 2016, 2017 and 2018”. On the same day, the accountant sent the client yet another invoice for about 250 euros, for “handling tax matters for 2017 and other advisory work”. The client refuses to pay these ‘extra’ invoices. As an explanation, the accountant then sends a letter. “In that letter, the accountant writes that the costs incurred had rather diverged from what fit within the price agreement, that a total of €5,051.80 was invoiced for 2016, that the calculation took into account a time expenditure of 8 hours for the whole year and 6 hours for implementation, and that those 14 hours ultimately became 33. The letter also states that the accountant is no longer able ‘to reproduce that very precisely and to indicate exactly what it was due to and/or where it went wrong’. The client did not understand where these costs came from, relied on the fixed price agreement, and objected to these ‘extra’ invoices.

The accountant then immediately suspended his ongoing work, which had already been paid for. The accountant went to court to still get his invoices paid.

Ruling:
First of all, the subdistrict court notes that the explanation for the extra costs given by the accountant in his summons differs from the explanation initially given to the client in the letter. The subdistrict court therefore agrees with the client that the accountant’s vague reasoning about the invoice cannot be followed. The accountant did not succeed in giving a proper explanation of the ‘extra’ invoices with an account of what the extra hours were spent on. As a result, he failed to meet his burden of assertion.

Because there was thus no shortcoming on the client’s side, the accountant was also not allowed to suspend his work. By suspending, the accountant, according to the court, was now in attributable default himself, which entitled the client to dissolve the agreement. By dissolving the agreement, the accountant could whistle for the contract sum for the suspended work. In addition, the subdistrict court ruled that the accountant must pay the client’s extrajudicial costs and litigation costs.

Lesson 6: To recognise in time that work will exceed the agreed budget, it is important to have a good digital project and time-tracking management system. As lawyers, we also use such systems. You can then very easily inform the client before the time is spent. You then also still have the choice of limiting your billable time or spending it on another client.

Lesson 7: If the damage is already done and, as in this case, you only find out late that you have carried out work that was never invoiced, then at the very least you will need to have a very good explanation of what these additional-work costs are based on. Resistance is of course to be expected if the client is confronted with a higher invoice for financial years that have long since passed and for which the annual accounts were prepared by you yourself. But if you have a good explanation, you as an accountant should still be paid, because ultimately an agreement is an agreement, including for an additional-work rate.

Lesson 8: For long-term client relationships where the original assignment terms no longer fully cover the situation or can no longer be found, make sure you send a new assignment confirmation. It is wise to review the engagement letter with your client every 2 to 3 years and make new agreements, and also declare the new general terms and conditions applicable and send them along. Filing them with the Chamber of Commerce, incidentally, does not relieve you of the obligation to send them along.
Lesson 9: Do not use any rights of retention, suspension and cessation haphazardly, but check whether the file is ready for that, or consult a lawyer. Otherwise you risk afterwards being accused of having deployed heavy-handed measures, and a court will penalise that.

For more information: see also the direct link to the ruling on rechtspraak.nl

4. Disciplinary tribunals also punish mistakes around invoices

In many cases, an invoicing dispute will end up before the civil court. The invoice remains unpaid, so the accountant feels compelled to seek justice in court (as in the cases above). It also happens a lot that clients are dissatisfied with the accountant and go to the disciplinary tribunal (the Accountantskamer).

Case:
So too in this case. The accountant had been working for the entrepreneur in question since 2015. On 23 January 2019, the client and the accountant discussed the draft 2017 annual figures and the 2017 income tax returns. During that discussion, it was also agreed that the accountant would prepare the 2018 financial report and the 2018 income tax returns for the entrepreneur. As part of that work, the accountant asked the client for documents. On 17 May 2019, the client asked the accountant for the 2018 draft documents. The accountant then asked for additional documents, to which the client responded that he had already sent those. On 3 June 2019, the client again urgently asked the accountant for the 2018 draft documents. He then receives the automatic reply that the accountant is away from 21 May to 11 June 2019.

On 18 July 2019, the client sends the accountant a reminder, and again on 2 August 2019. A meeting is scheduled. On 5 August 2019, the accountant lets him know that, due to circumstances, he can only continue working on the 2018 income tax return later that week.

The client feels a meeting without a draft is pointless, and subsequently cancels the appointment and terminates the agreement. The accountant would not have kept to the agreement to complete the 2018 documents before the holidays. He is also not satisfied with the way the accountant has handled the VAT arrears. He asks for all his documents to be returned and assumes he will not receive an invoice for the work the accountant carried out concerning 2018.

On 8 August 2019, the accountant responds to this. He offers to still complete the 2018 work, and asks the client to pay the enclosed invoice, which relates to the work for the 2017 financial year. The client asks the accountant for an itemised invoice for 2017, because in his view the invoice is not correct. In response, the accountant initially only sends a payment reminder, and a month later also an explanation. Because he wants to close the matter, he proposes to the client to pay that invoice, in exchange for which he will waive invoicing for the 2018 work. The client did not accept the proposal.

The client goes to the disciplinary tribunal and complains that the accountant did not keep to the agreement to submit the work before 1 April (before the holidays), that the accountant did not resolve a specific ambiguity, that the accountant communicates poorly, and that the accountant refuses to itemise invoices.

Ruling:
The disciplinary tribunal dismisses all complaints except the last one. It is settled case law of the Accountantskamer and the Trade and Industry Appeals Tribunal (ECLI:NL:CBB:2019:418) that an accountant may be expected, when asked, to itemise his invoices and thereby make clear to his client what work he has carried out and is charging for.
In light of this case law, the explanation of the invoice sent by the accountant is insufficient, the Accountantskamer rules. It follows that this part of the complaint is well-founded; the accountant receives a warning.

Lesson 10: Not only the civil court, but also the disciplinary tribunal, considers itemising invoices, for example, to be very important. So pay attention to preparing your invoices. It is the finishing touch of your service, not merely an administrative formality. For your client, an invoice is by definition not a pleasant thing to receive, and so it is often looked at critically and put under a magnifying glass. Your diligence is expressed in the translation and accounting of the quotation into the invoice.

So make sure it is completely clear to the client what the invoiced amount was spent on. Note dates for meetings or name the documents you produced by name. An accountant who, in 2018, among other things, sent a client a huge bill but then failed to substantiate it, received, among other things, a reprimand for this (read more about this disciplinary case here)

See also this link for more information.

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