Outstanding Vs. Past Due Invoice

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Businesses often purchase goods on account. This allows them to avoid paying for goods or services immediately with cash. Companies often hope to turn purchased resources into profit and pay cash to satisfy the bill. Items businesses purchase on account can be outstanding and also past due. Both have a specific description in accounting.

Outstanding Invoices

  • Outstanding invoices are those the company has yet to pay. In accounting, the accounts payable department tracks all outstanding invoices and schedules them for payment. Accounting clerks in this department receive the invoices, review them for accuracy, seek approval from managers and record them into the accounting system. The clerks often require a schedule to track each outstanding invoice to ensure proper and timely payment to vendors.

Past Due Invoices

  • A past due invoice is one a company has yet to pay and is overdue. Normally, invoices have due dates. Failure to pay the invoice by this date results in the invoice becoming past due. Vendors may tack on late fees or penalties that customers must pay to fully satisfy the outstanding invoices. Past due invoices usually appear on the company’s accounts payable report. They often appear on the top and may indicate how many days the invoice is late.

Outstanding Explanation

  • In accounting terms, all unpaid invoices are outstanding. This includes any past due invoices. Not all invoices are past due, however. This only occurs when a company fails to pay invoices by the due date. Invoices marked as “due upon receipt” require payment in the company’s upcoming payment cycle.

Business Risk

  • Past due invoices can ruin a company’s business credit. Vendors may lower the company’s credit limit or stop accepting orders on account. Long-standing past due invoices may eventually go to a collection agency. This results in a permanent mark against the company and/or business owner, depending on the company’s business form. Other vendors may not issue credit accounts for a company that has many past due invoices.

References

  • "Accounting"; Charles T. Horngren, et al.; 2007
  • Photo Credit Milenko Bokan/iStock/Getty Images
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