We have a supplier in China - providing market research data since 2010. We have just found that they have not invoiced us since end of 2010 and 2 full years are outstanding, amounting to a significant sum. We can not pay this now because 1) we had not put that money aside (because they had not invoiced us) and because our business turnover has declined significantly since that first payment. We are not sure how to address the situation - the longer this goes on the bigger the problem if/when they invoice. But to alert our supplier that we owe them money now would be equally bad. Are there provisions to allow us to delay or spread out any back payments? How long after provision of a service are we liable to pay? If they can't keep track, why should we be expected to do so? There is a further slight complication which raises some concern. The first invoice was raised by the owner of the business and paid directly to his account - we received a letter of assurance that this money was being paid directly to him as the official representative of the business in China. I am wondering now whether this was a cover for not putting the payment through his company books. This would explain why their accountant has not raised any more invoices ..... ?
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I don't think you have any obligation to notify the supplier that they have not yet invoiced you. It is up to you to decide whether or not they will chase for payment and make a decision to write it off or not.
However, if you do not have the cash or mean to pay for the services, is your company insolvent?
Should we alert supplier to invoice us?
As you are still using the supply they provide, I would in any case start putting aside funds to cover at least the services you are receiving now in a seperate bank account to avoid increasing any potential debts you cannot repay, else you will only be making the situation even worse for yourselves in the future.
I had a client recently who pays current invoices for a supplier, who asked him to settle an invoice he had never received going back 18 months, he did not open his mail and didn't see the demand. They took this to the small claims court, and again he didn't open his mail. Only after I visited and he gave me some of his mail to open, did we find that he had a limited time to settle to avoie a CCJ being put against his name (a sole trader). This was a UK based company.
I do feel for you, as this must be causing mental anguish, but as it is a regular service, I also feel you should have been trying to put some funds away for this on the off chance they remembered to bill you. As if you were owed the money - not only would you want it back, you would need it back.
If you continue to receive the supply (as I fear if you stop, this might just generate that big invoice), I can only suggest if you have a surge in turnover and can keep putting money aside or the past as well, until you feel you have enough to pay them. You can alert them then, if only to get the worry of your mind. (Although I am unaware of the legal aspects of whether you should).
Fair exchange
These backlogged invoices tend to show themselves when the accounts are brought into line and reconciliations completed. Then the supplier will regard you as a cheat for saying nothing. Bad for trust, that is.
I have had a few of these and when I contacted the supplier/contractor, he was impressed. It built greater trust and loyalty towards my business. You have received the service, and presumably it was worth the cash involved.... I think you should pay up. It will come back to bite you in some other form, one way or another, if you try to cheat the supplier.
Late invoices
I appreciate your problems. You could, however be proactive. Approach your supplier. Say that you want to cut the work they do for you and that they have not billed you for 2 years. Explain, that because of downturn in business you don't have teh cash to pay all the arrers in one go. Say that you will pay for the reduced ongoing services on a pay as you go basis and agree a repayment plan spread over, say 24 months, to clear the arrears.
That way you can reduce future laibilities whilst still hopefully retaining the trust of the supplier by being upfront and honest.
How has it taken so long for this to be noticed?
Surely it would show up in your purchase ledger in the over 90 days column. Did your accountant accrue for the invoices in your Profit & Loss Account ?? If not your accounts are not showing the true position and you may have paid too much tax
If you intend to pay, I would come clean and negotiate a payment plan. Leaving it for the other company to find out will only hinder a payment plan negotiation.