I provided the safe path in the VM configuration as suggested by the system, but instead of creating folder for invoices inside the folder (vmfiles/invoices) VM created a new folder called "vmfiles invoices" along the vmfiles folder I have created before and specified in the config settings.
Looks like your DIRECTORY_SEPARATOR is not defined. Please tell your anything about your php version.
My php version is 5.3.10. Running Joomla 2.5.4 with VM 2.0.6