Pre-invoicing: what the proof of debt gives away
An invoice raised before the goods have left, or for more than was delivered, is funded money with nothing behind it. The paperwork usually shows it, if you put the documents side by side.
On Business Audits · 9 September 2026 · 5 min read
Pre-invoicing means raising an invoice before the work it bills has been done. Sometimes it is a client under cash pressure pulling next week’s sales into this week’s funding. Sometimes it is the first step of something worse. Either way, the financier has advanced money against a debt that doesn’t yet exist. If the business fails before the goods are delivered, the debtor owes nothing.
It is one of the most common findings in a receivables finance audit, and one of the easiest to see, because the evidence sits in documents the client already has.
The documents that matter
For each invoice in the sample, ask for the paperwork that proves the debt:
- the customer’s order, which shows what was asked for and when;
- the delivery note or proof of delivery, ideally signed by the customer, which shows what arrived and when;
- for services, the timesheet or job sheet, which shows who worked, on what days, and for how long.
Then compare each document with the invoice. The comparison has three parts: the date, the quantity, and the thing itself.
Dates: the delivery after the invoice
The plainest sign of pre-invoicing is a delivery note dated after its invoice. An invoice dated 28 March with a delivery note dated 2 April was raised five days before the goods arrived.
One late delivery note can have an innocent explanation, such as a part-shipment or a note dated when it was signed rather than when it left. A pattern can’t. If several invoices in the sample were raised before delivery, and especially if they cluster around month end, the client is invoicing to reach a funding figure.
Name every lag, with its length. “Three invoices dated before delivery, by 2, 5 and 11 days” tells the financier far more than “some timing differences”.
One late delivery note is a question. Three at month end are an answer.
Quantities: the short delivery
An invoice for 120 cases against delivery notes totalling 102 is billing for 18 cases that never arrived. Add up every delivery note against the invoice, line by line, because a single invoice often covers several deliveries. Compare like with like: cases with cases, hours with hours. Don’t turn days into hours on an assumption, or you will create shortfalls that aren’t there and miss the ones that are.
A short delivery may be a genuine error that a credit note will correct. If so, look for the credit note. If it never comes, the customer will simply pay the lower amount, and the shortfall becomes dilution on a debt you have already funded.
The thing itself
Check that the goods on the delivery note are the goods on the invoice. The same item may carry a different code on each document. That is fine if they are the same thing and a problem if they aren’t. A delivery note for one product supporting an invoice for a more expensive one is a pricing question at best.
For timesheets, check the names and the weeks. A timesheet for a different week, or for a person not named on the invoice, doesn’t support it.
Where it hides
Pre-invoicing is easiest to hide where there is no single delivery to point to. Stage payments on contracts, monthly service charges invoiced in advance, and framework orders called off over weeks all blur the line between “done” and “promised”. For these, ask for the evidence of progress: a signed valuation, a completion certificate, or the customer’s own acceptance. An application for payment is not the same as an approved one.
How many invoices to test
There is no single right number. The sample should cover the largest debtors, any customer you are already unsure of, and a spread of dates including the last days of a month. Twenty to thirty invoices is common for a routine audit. Widen the sample when the first results show problems, because each failed invoice suggests others.
Ask for the documents yourself, from a list you choose, and set a short deadline. Paperwork produced weeks after the request has had time to be tidied.
When the client says “we always invoice on despatch”
Invoicing on despatch is normal and acceptable, as long as the goods really were despatched that day. The test is still the same: the delivery note, signed by the customer, should show arrival within the usual delivery time. If goods “despatched” at month end consistently arrive a week later, ask the carrier or check the customer’s goods-received records.
What to do with the findings
- Ask the client to explain each lag and each shortfall in writing.
- Check whether any pre-invoiced debts were in the funding requests you paid.
- Consider a documentary verification of a wider sample before the next audit.
- Record the finding as an action point with an owner and a date, and test the same customers next time.