Continuing discussion from CSA subscription contracts management feature: oportunity in France with the CSA network and Subscriptions: Next steps for the beta
A- Some basic legal / accounting principles
It is not possible to ask a payment without an invoice. This is an international accounting principle. AND the rule is that you cannot issue an invoice before the property of the products concerned has been transferred.
There are some exceptions, especially, it is possible to sell something that you gonna deliver in a long time, and in the terms of sale (= sales contract), you can precise that “30% has to be paid at order time” for instance. This means you can issue a “deposit invoice” and ask the customer to partially pay before the product has been delivered.
Another important rule : legally, you cannot sell anything without a sales contract (= terms of sale). Have you bought something on Amazon ? You always have a checkbox at checkout “I have read and accept terms of sales”. A sale is a commercial transaction ruled by a contract.
I guess most marketplaces have in the marketplace “terms and conditions” the terms of sales, that are the same for all sellers. THIS IS NOT OUR CASE. We have nothing in our terms and conditions, and I think that logic would be hard with our subsidiarity principle, every hub probably should have their own terms of sales that their customer need to “validate” at checkout.
You can translate this French page that explains pretty clearly that obligation.
B- Enabling customers to plan automatic orders vs pre-selling 30 baskets vs selling a subscription
We can distinguish 3 cases:
1- A hub wants to enable customers to automate orders. A customer plan in advance a future order, but at the moment the planning is done (standing order is set up) there is no transaction, no sale happened. There is no commitment, a customer can pause or stop the planned order. The sale and invoicing happen at each OC.
2- A hub wants to pre-sell a set of baskets. The hub can offer customers to buy in advance baskets they gonna receive in the coming weeks. In that case what is bought is a specific product (ex: a 3kg seasonal basket). Legally, it is normally not possible to invoice something you have sold but not delivered. You can issue “deposit invoices” to get some prepayments. So it is legally possible to capture a “sale” long in advance before the products are delivered, and ask “deposit” through “deposit invoice”, but the remaining can only be invoiced once the products are delivered. So the transaction is complete when all the basket pre-sold are delivered. If a basket can’t be delivered, or is 1kg instead of 3kg, the customer can asked to be reimbursed as the “sales contract” is not honored.
3- A hub wants to sell a subscription for a weekly seasonal basket. The hub needs to specify what product the suibscription is for (ex: seasonal basket medium, estimated 5kg) BUT can specify in the sales contract that if there is no harvest, the basket can be empty. The transaction happens and is complete at the sale of the subscription. What is sold here is not a bunch of products, but a subscription. The subscription IS a product in itself. It can be invoiced and money can be asked straight away, just like when you subscribe to a magazine. If the sales contract attached to the subscription is not honored (terms not respected by seller) the customer can sue the seller.
C- The “CSA contract”
As explained above, the “terms of sale” = sales contract is something that any seller need their customer to accept. In the case of CSA in France, they have formalized in a pretty “heavy” way that contract as they really wanted the CSA members to understand what they were committing to. But it would be possible, and they would be open to that, to “transform” their contract into some form of “sales contract / terms of sale” that specify what the customer commit to when buying a CSA subscription.
For example a CSA would include in their ToS:
- That the size and content of basket can vary depending on the producer harvest, and that if no harvest, the basket can be empty.
- That weeks of delivery are planned in advance, and if customer can’t collect her basket, she loses it. Some CSA can propose to postpone under specific conditions.
- The total amount is payable at the moment the subscription is purchased. Some CSA can offer payment facilities/schedules.
D- Step by step operation and accounting regarding the sale of a subscription
THIS IS IMPORTANT TO UNDERSTAND OR WE WILL BUILD THE FEATURE WRONGLY
1- A subscription is sold.
411 client (D) (for the total amount of the subscription for the period)
707 goods sales © (for the total amount of the subscription for the period)
As the transaction happens, the customer receives an invoice for the whole subscription amount. The seller might offer some payment facility, like “pay now 40% and you can pay 30% next months and 30% the months after”. So after invoicing is done, payment can happen later. But the “share” has been bought by the customer, the commitment is sealed through the sales contract (see above).
2- As the turnover for all the basket sold in advance through the subscription has been recognized before the product ownership has been transferred, a corrective operation is registered in accounting to say that this turnover are “deffered income” = income perceived before the delivery of the product sold actually happened.
707 goods sales (D) (for the total amount of the subscription for the period)
487 Deffered income © (for the total amount of the subscription for the period)
3- At each basket delivery, a new accounting line is recorded to recognize the turnover corresponding to the product actually delivered, which has already been invoiced through the subscription sales
487 Deffered income (D) (for the amount of the weekly basket)
707 goods sales © (for the amount of the weekly basket)
No invoicing happens at the delivery stage as the products delivered have already invoiced ! So the delivery (proved by a delivery note) triggers a turnover recognition, but not a billing.
When the last delivery promised in the contract is done, and payment is all done, the contract has been fully executed.
4- When a total/partial payment from the customer happens, it cleans the customer debt towards the seller
512 Bank (D)
411 client ©
This depends on the payment plan offered to the customer when they buy the subscription.
E- What are the needs/problems not yet satisfied
That could be different stories of a “CSA can sell subscriptions” icebox. Or maybe we need to split in multiple needs and handle them one by one, but some will need to be released together as are dependent on each other. Not sure what would be the order, but the very first icebox/need for me would be to “a subscription a can be sold, purchased, billed”.
- Today it is not possible to buy a subscription and be invoiced for it, and pay for it.
- We need to create some new type of product that can be purchased that is a subscription for a given product for a certain number of weeks / delivery schedule (not a composed product). When it is bought, it is billed. > Make a subscription a PRODUCT that can be bought and invoiced for.
- Hub needs flexibility on the rules attached to that subscription (ex: customer can postpone a basket or not, etc.) Those rules will determine what a customer can/can’t do when editing a subscription / postponing a delivery, etc.
- It is not possible to have products in an OC delivered but not billed, which we need to make possible as products that are part of a subscription have already been bought and invoiced. For instance, a product attached to a sold subscription can be 'tagged" as not billable and not appear in OC invoice.
- Products already bought through a subscription can’t be cancelled, removed from basket. Maybe they shouldn’t even appear in the basket as they have already been sold, so it can be confusing if you see them again in your OC basket…
- It is not possible to propose payment schedules attached to payment methods = payment facilities like “buy now and pay given interest-free payment plan” (v2, payment can be handled out of OFN in v1)
- We need to implement some customer front end to buy a subscription that has been put for sale by a hub (which is different from a customer front end to “set up a recurring order” @danielle important to have in mind), and then do the action you can do on that subs (postpone a delivery, etc.)
- It is not possible to set up (hub) and validate (customer) hub terms of sales.
- A hub need to be able to upload term of sales
- At checkout, customer needs to be able to validate them (for CSA they would like more than a checkbox to make sure customer understand what they sign for, but can be in v2)
@Kirsten @tschumilas @luisramos0 @Rachel I summed up all what I shared with you and we discussed last week. @danielle @sstead I know it’s a bit boring but it’s important that you understand all what’s in that post as crucial to plan the future of “subscription” IMO.