What is an account payable and what happens if I can not pay my accounts payable on time? In this article, we go through everything you need to know about accounts payable and tips on things you can do if you can not pay your invoices on time. We also go through what happens to the invoices if your company goes bankrupt. Let’s start by going through what accounts payable and accounts payable are.
What is an account payable?
An account payable is just as it sounds a debt for a good or service from a supplier. It can be a good or service that you bought and received an invoice from a supplier or lender that you have not yet paid. Account payable remains until it is paid and must be paid according to the agreed payment terms and time frame.
Account payable is a type of ledger, specification to an account, where you get an overview of accounts payable that have arrived and are to be paid. In the specification, you can clearly see which invoices will fall due and information regarding the total amount of accounts payable that the company has. There is also information regarding the suppliers. For example, address supplier name and invoice number.
Post accounts payable
Accounts payable can be booked either according to the cash method or the invoice method. In the cash method, accounts payable are not booked until the financial statements. If you apply the invoice method, you instead post accounts payable when they arrive. An account payable is classified as a current liability. This is because invoices are normally paid within 1 year.
What do I do if I cannot pay my accounts payable?
If you are unable to pay your accounts payable on time, you should contact the supplier directly and explain the situation. Sometimes it is possible to make an instalment plan or postpone the payment. Review which invoices are most important and whether there are expenses that can be paused or cancelled.
There is nothing that can stop you from paying your accounts payable. If you do not pay on time, the company you are in debt to can either send a reminder or send it directly to debt collection. There is no law that says they must send out a reminder if it is not written in your contract. If you can not pay the remainder, it becomes a debt collection claim and if you do not succeed in paying the debt collection claim, it goes on to the Enforcement Officer.
The bailiff will then send you a payment order. If the demand for a payment order is incorrect, you have 10 days to appeal. When the debt is determined by the Enforcement Officer, a collection is made to pay the debt. You will then receive a payment remark from a credit reporting company. Which may negatively affect your company’s credit opportunities in the future. For companies, it usually takes 5 years before the remark is removed from the register.
What happens to accounts payable if my company goes bankrupt?
Depending on your company form, it will look different if your company goes bankrupt. If you have a bankrupt company, the company’s assets will be sold off to pay off the debts. Thereafter, the company is liquidated, which means that the supplier cannot make demands on the company.
If, on the other hand, you have an individual company, a private asset may be used to pay off the debts. As a supplier, you can demand that the individual trader pay his debts when the company has gone bankrupt.
If you have more questions regarding accounts payable or want help with your company’s accounting and financial statements, you are warmly welcome to contact us for a meeting. Our goal is for you as a customer to be able to maximize your profits and reduce costs.