Aged Creditors on balance sheet

How long can you keep a creditor on the balance sheet if they have not invoiced for their goods.

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We have just under £50k of GRNI's (Goods Received Not Invoiced) on our balance sheet against creditors which are over 2 years old.  Some of the GRNI's relate to stock (building materials, which has been used) and some to the hire of plant which has been off hired.  How long should I keep this figure on the balance sheet and how long does a supplier have in which to invoice me after I have taken possession of the goods.  Is there any legislation  that I can quote or refer to.

Thank You

Replies (25)

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By SkyBlue22
27th Oct 2017 12:39

Have you attempted to contact the supplier? What do they say about their non-invoicing?

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RLI
By lionofludesch
27th Oct 2017 12:45

Do you really owe this money ?

It's not unknown for a paymdnt to be allocated direct to the nominal account instead of the supplier's Purchase Ledger account.

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By carlp893
27th Oct 2017 13:23

The posting of payments has been reconciled so we are confident there isn't a miss posting element. We have not contacted our suppliers yet but this will need to be done at some stage. Is there any time frame that supplier have in which to invoice us ?

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RLI
By lionofludesch
27th Oct 2017 13:34

Is this one creditor or a few ?

It seems a very strange state of affairs where such large sums have not been invoiced. I'm looking for a sensible explanation......

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Tornado
By Tornado
27th Oct 2017 13:45

I think you need to contact the supplier about this immediately.

There are potential Money Laundering implications here ... such as stock physically missing from the supplier's warehouse but nothing to say where it is. On the face of it, you are hiding stock for the supplier. (For every debit there has to be a credit, even across different businesses).

This is important and you need to sort this out immediately to establish the true liability you have to this supplier.

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Flag of the Soviet Union
By thevaliant
27th Oct 2017 13:56

Lots of technically correct replies here, but not a lot of real world answers.

I've had several clients have this for many a year. Simply put, they receive goods in and book an accrual. Normally an invoice arrives and all is fine. But sometimes, it just doesn't or perhaps it does but is lower and you retain part of the accrual 'just in case'.

A. Technically correct answer:
Ring up the supplier. Insist you have the goods. Insist they invoice. Insist they take payments. Insist you reduce your own shareholder value (Companies Act be damned).

B. Real world answer:
Say nothing - carry the accrual for a few years (2-3) and then write them back.

C. Another real world answer but a bit dodgy:
Say nothing - carry the accrual for six years, shouting LIMITATION ACT 1980 at the auditors. Write back with great reluctance after seven years and grumble you've now got to pay tax on that, and somehow justify in your head that you paid the money (but you didn't) and why can't you keep the tax relief on it.

I've seen (B) and I've seen (C). I have never seen a client do (A).

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Replying to thevaliant:
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By lionofludesch
27th Oct 2017 15:05

thevaliant wrote:

Lots of technically correct replies here, but not a lot of real world answers.

I've had several clients have this for many a year.

For £50000 ?

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Replying to lionofludesch:
Flag of the Soviet Union
By thevaliant
27th Oct 2017 15:39

The two clients I had direct dealings with (and I've heard rumours of others at my firm but no personal involvement):

One was a 'Type B' client and had managed to accrue £42k in three years.

Another was a 'Type C' client and had in excess of £120k after six years and flatly refused to consider a write back until the six year limitation period had passed.

We also have a 'Type D' client, who received correspondence/evidence suggesting a liability might arise. They would accrue. And never EVER write that back. They still have accruals from the late 1990s in their accounts (no audit thank goodness).

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By carlp893
27th Oct 2017 15:21

There are a number of suppliers involved in this and there are delivery notes to justify the amount sitting in creditors. I am confident there are no 'dodgy' dealings afoot. Our directors are happy to sit on the accrual (they are actually insisting on it) and I must admit I would feel a bit silly contacting our suppliers insisting they invoice us for goods we received over two years ago. The Limitation Act 1980 appears to be a good reference - if there are any more references please let me know. Thank you 'thevaliant' for the real world answers, I'm sure this is what we are all thinking.

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Replying to carlp893:
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By andy.partridge
27th Oct 2017 16:25

carlp893 wrote:

I must admit I would feel a bit silly contacting our suppliers insisting they invoice us for goods we received over two years ago.


Why would you feel a bit silly. Shouldn't it be the supplier who is embarrassed?

I don't know if you have said if they are regular and ongoing suppliers but if they are it would seem a curious relationship whereby you continue to order goods in the knowledge you haven't paid for past orders and, it seems, have no intention of doing so.

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Replying to andy.partridge:
Flag of the Soviet Union
By thevaliant
28th Oct 2017 01:16

A 'curious' relationship?

I think it's a great one. I order goods. They arrive. No invoice follows. I'll accrue and put the money aside, but if after three years they haven't asked, I'll write back the accrual and spend the money.

Sounds like the perfect business deal if you ask me. These people aren't your friends. If they're daft enough to supply goods without asking for payment that is surely their problem.

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Replying to thevaliant:
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By andy.partridge
28th Oct 2017 10:03

Irony?

'Put the money aside'. Really? Don't you mean make a tax deduction.

No they are not friends. If they are providing goods that do the job to the extent that I make repeat orders I should want to reward them appropriately and not deny them because of some muppet in accounts that might have caused them a whole load of hassle.

At the end of the day people do business with people. It is best done in a respectful way and not with the motive of 'how can we avoid paying'.

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By lionofludesch
28th Oct 2017 10:14

Well said.

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Tornado
By Tornado
28th Oct 2017 09:53

If a supplier sells you goods, then they must provide you with an invoice

https://www.gov.uk/invoicing-and-taking-payment-from-customers

In my view, any attempt to write-off, conceal or otherwise not pay for goods supplied, without a legitimate reason, is reportable under Money Laundering regulations, contravenes VAT regulations (where traders are registered) as well as possible accusations of theft.

Any talk about the statute of limitations is just wishful thinking, It is the duty of a customer to obtain a proper invoice from the supplier, particularly where VAT is involved.

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Replying to Tornado:
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By lionofludesch
28th Oct 2017 10:12

The advice on this link is only slightly weakened by HMRC not always having a great record of knowing what the law actually is and writing any old stuff on their website.

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Replying to lionofludesch:
Tornado
By Tornado
28th Oct 2017 10:30

I get what you are saying, but this is a link to a gov.uk site which is not HMRC, so it is really Government advice.

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By lionofludesch
28th Oct 2017 12:58

The rest of the Government is well run ?

It's just HMRC who makes things up ?

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By john cottam
28th Oct 2017 10:20

Are there any ROT clauses in your suppliers terms? If so it would be advisable to pay for them as you may not have title

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By bernard michael
28th Oct 2017 11:01

Don't forget if they are well run there is an 2 year old debt in the suppliers books. Some new bright spark in their accounts dept may chase this up. I agree keep the accrual for at least 3 year
Have they supplied you with goods and been paid in the normal way since the non invoiced supplies ?

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By carlp893
29th Oct 2017 11:07

Thank you for your replies - these discussions are great in that they give a wide variety of issues to consider both technically correct and 'real world' and I acknowledge the moral obligations. The suppliers are national & international suppliers and I suspect this situation has occurred through less than perfect stock and debtor control. I am also aware that these suppliers have overcharged customers in order to balance their stock / hire charges - welcome to the real world. I would be grateful if someone could explain why the 'statute of limitations' cannot be relied upon in such an occasion ?

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By tom123
29th Oct 2017 11:35

It depends on whether you want to run a tight ship.

I won't chase GRNI for a few months, but would tend to after about four months.

After all, I want the VAT reclaim.

Mind you, I have three way matching of purchase orders, and am confident I will have received the goods.

There is a difference between managing cash flow (which is a key component of many jobs) and trying to see if you can 'put one over' on a supplier.

In particular I look out for the 'one man band' suppliers. I worry less about the major 'catalogue' style parts sellers.

We are subject to audit, though, (through choice), and I expect the auditors to have something to say about GRNI from years ago.

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By lionofludesch
29th Oct 2017 11:50

There's also the problem of answering that difficult question from HMRC - "what's this huge accrual about?"

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Melchett
By thestudyman
30th Oct 2017 19:36

Another real world scenario.

Especially if you use purchase orders (3 way matching ) sometimes an invoice might be received and paid without a purchase order. Or a PO is on the invoice but not formally matched off. End result is the accrual stays there for ever.

We had hundreds of those when I worked in the NHS, accruals going back years. Goods were obviously received.

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By mrme89
30th Oct 2017 20:25

It makes commercial sense to accrue and not chase.

It is not your job to act as credit controller for your suppliers.

Whilst they are being slack, the business is saving money by not going into, or going further into credit facilities.

By accruing, you are acknowledging the cost is going to come in at some point. After two years though, I’d write it off - unless it was a sum that if resurrected could put the business into financial hardship.

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By lionofludesch
31st Oct 2017 07:16

You're not acknowledging that the cost is coming in as soon as you write it off.

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