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“Can’t afford to pay the invoice”

Occasionally you may come across a company with late payment notices against it indicating it couldn’t pay its bills.

In situations like this it’s worth taking note of any other notices of late payment that may have been posted against the company in question, wether the notices are current and how long overdue they are. In other words has the company been issuing different explanations for late payment to suppliers as well as the “can’t afford to pay” explanation.

Once again context is vital. If several different explanations for late payment are being issued concurrently with the “can’t afford to pay” explanation then it’s reasonable to assume that something may be amiss.

If a company can’t afford to pay one invoice it’s seems likely it will not be able to afford to pay other invoices of similar size or larger thereby rendering all other explanations redundant.

However, it’s not fair to say that all companies supplying this as a reason to explain late payment do so expressly to duck paying their bills while maintaining a healthy balance sheet.

It’s always possible the company may indeed be having financial difficulties but if that is the case then it would be fair to assume that the same explanation for late payment may well have been issued more than once, so if you see this be sure to view it in context of any other notices that you may see in relation to the same company.

 

What other action should you take?

“Can’t afford to pay the bill” is a sign that the company may have gone bust or is running so dangerously short on cashflow that it could be about to go bust. If the company is a small one it may be worth running a background check on the company directors.

While not wanting to tar all company directors with he same brush, it’s a sad but true reality that some people make a living from declaring bankruptcy and then restarting new businesses.

These are people who will set up a business for the short run and hire firms to do work or supply goods which it will then sell but ultimately and legally declare bankruptcy.

There are people that will do this more than once and so a company background check can help show this up. It goes without saying that these operators should be avoided at all costs.

Look for County Court Judgements (CCJ) against the company’s directors, almost all credit reference agencies will be able to supply this information.

Also check for winding up petitions, these are very serious and generally only issued as a last ditch resort in cases where all goodwill has broken down between creditor and debtor. A list of the most recent winding up petitions can be found on the Justice department’s website here.