Your company’s bank account may be empty, even though customers still owe you thousands of pounds. This can leave you unable to pay HMRC, suppliers, staff or other immediate costs. It can also make it difficult to understand whether the company is insolvent and how you could afford to close it.
Unpaid invoices can affect liquidation because they’re usually treated as company assets. However, their value depends on how likely they are to be paid. A licensed insolvency practitioner will look beyond the total on your sales ledger and consider what can realistically be recovered.
No cash but have unpaid invoices? Check your options
Money owed by customers may be treated as a company asset and could affect how a liquidation is funded. Answer a few quick questions so we can help you understand the next step.
Unpaid Invoices Are Still Company Assets
An unpaid invoice represents money owed to your company. In accounting and insolvency terms, it may be described as a trade debtor, receivable or book debt.
This means a company can have no cash in its bank account but still own valuable assets. For example, it may have:
- £20,000 in unpaid customer invoices
- Machinery or vehicles
- Stock that can be sold
- A deposit held by a landlord
- Money owed by a director or another connected company
These assets may be considered when calculating company liquidation costs and deciding how the process could be funded.
However, an invoice isn’t the same as cash. Its true value depends on whether it can be collected.
A £10,000 invoice from a reliable customer who has confirmed a payment date could be worth close to its full value. A disputed £10,000 invoice that has been overdue for a year may be worth far less. In some cases, it may not be recoverable at all.
Late payment is a widespread issue. Research published by the Office of the Small Business Commissioner estimated that UK businesses are owed £26 billion in late payments at any given time. It also estimated that 14,000 businesses close each year because of late payments.
Can Your Company Be Insolvent If Customers Owe It Money?
Yes. Unpaid invoices don’t automatically mean that your company is solvent.
There are two main ways to assess company insolvency.
The Cash Flow Test
Your company may be insolvent if it cannot pay its debts when they fall due.
Warning signs can include:
- VAT, PAYE or Corporation Tax becoming overdue
- Suppliers repeatedly chasing for payment
- Wages being paid late
- Direct debits being returned
- Using personal money to cover routine business costs
- Being unable to meet loan or finance repayments
Expected customer payments may improve the position, but timing matters. An invoice that might be paid in three months won’t necessarily help if wages and tax are due this week.
The Balance Sheet Test
A company may also be insolvent if the value of its liabilities is greater than the realistic value of its assets.
The word “realistic” is important. You shouldn’t assume that every invoice will be collected in full. The financial assessment needs to reflect likely recovery values, not simply the total amount shown in your accounting software.
If the company cannot meet its obligations, you may need to explore how to close your company with debts or whether a recovery option remains available.
Official guidance confirms that a company may be insolvent when it cannot pay debts on time or has more liabilities than assets. It also advises directors to obtain professional advice before deciding what option is appropriate.
Worried about insolvency?
Get in touch with Anderson Brookes today. By answering a few quick questions, we can help you to understand which insolvency options are right for your business.
What Happens to Unpaid Invoices During Liquidation?
Unpaid invoices don’t disappear when a company enters liquidation. They remain company assets.
Once a liquidator is appointed, they will normally take control of collecting money owed to the company. The process may include:
- Reviewing the company’s sales ledger.
- Checking contracts, invoices and evidence that work was completed.
- Contacting customers to confirm outstanding balances.
- Investigating any disputes or deductions.
- Requesting payment into an appropriate company or liquidation account.
- Taking proportionate recovery action where it could benefit creditors.
The liquidator may collect an invoice in full, accept a reasonable settlement or decide that further recovery action would cost more than it is likely to produce.
Money recovered becomes part of the liquidation estate. It can then be used towards the expenses of the process and creditor claims in the required order.
This is separate from what happens to debts after liquidation. Money owed to your company is an asset. Money owed by your company is a liability.
The Insolvency Act 1986 describes the liquidator’s functions as gathering in, realising and distributing company assets. This can include collecting outstanding invoices as well as selling physical property.
Find Out Whether Liquidation Is an Option
Answer a few quick questions about your company’s position. We’ll review your debts, trading status and any money owed to the business, then explain the options available.
Can Unpaid Invoices Pay for the Liquidation?
Potentially, yes.
If the company has collectible invoices, the proceeds may help pay some or all of the liquidation costs. This can be particularly important where there is little or no cash available at the start of the process.
Whether this is possible will depend on:
- The total amount owed
- How long the invoices have been outstanding
- Whether customers accept that the money is due
- The financial position of each customer
- The quality of the company’s records
- How quickly payments are likely to arrive
- The likely cost of collection
The invoiced total alone isn’t enough. A licensed insolvency practitioner will consider the estimated realisable value.
For example, your sales ledger may show £40,000 due from customers. After reviewing it, the practitioner may find that £10,000 is disputed, £5,000 is owed by a customer that has ceased trading and another £5,000 would cost too much to pursue. The estimated recovery may therefore be closer to £20,000.
Some fees or initial costs may also need to be covered before the invoices are recovered. Where a company has no immediately available assets, directors are sometimes asked to make an agreed contribution towards the initial cost. This is common and doesn’t, by itself, suggest that the director has done anything wrong.
Good preparation can support a more efficient, low-cost liquidation. Clear records allow the insolvency practitioner to understand the debtor position more quickly and reduce avoidable queries.
Should You Chase the Invoices Before Liquidation?
Normal and properly documented credit control may be appropriate while you’re assessing the company’s position. This might include sending statements, confirming payment dates and following up overdue accounts.
However, you need to be careful about what happens to any money received.
Once you know, or should reasonably know, that the company is insolvent, your responsibilities change. You must give proper consideration to creditors’ interests and avoid steps that could leave them worse off. The Insolvency Service confirms that directors continue to have specific duties when a company becomes insolvent, whether it is still trading or has already stopped.
You should avoid:
- Asking customers to pay you personally
- Moving payments into another company
- Hiding or informally writing off debts
- Backdating credit notes
- Selling or transferring invoices for less than their proper value
- Paying yourself ahead of other creditors
- Favouring selected creditors without professional advice
- Continuing to trade where this creates further losses
You should also keep copies of invoices, contracts, purchase orders, delivery notes, timesheets and customer correspondence. These records can make a major difference if a liquidator later needs to pursue payment.
You don’t necessarily have to stop all collection activity immediately. The right action will depend on the wider position, including whether the business remains viable and whether collecting the invoices could genuinely resolve the cash flow problem. Take advice before making significant payments or moving company assets.
Why Some Unpaid Invoices Recover Very Little
An invoice’s face value may not reflect what a liquidator can collect.
Recovery may be difficult where:
- The customer disputes the standard of the work.
- There is no signed contract or purchase order.
- You cannot show that goods or services were delivered.
- The customer has a valid counterclaim.
- The invoice is several years old.
- The customer is also insolvent.
- Retentions or contractual deductions apply.
- The customer believes it has already paid.
- The company agreed a discount that wasn’t recorded properly.
- Recovery action would cost more than the likely return.
You should give the insolvency practitioner a complete picture. Don’t remove disputed invoices from the records, but don’t present every balance as certain to be collected either.
Provide copies of any correspondence that explains a dispute. Even an email acknowledging the amount due or promising payment can be useful.
Could unpaid invoices help fund liquidation?
Money owed to your company may contribute towards the cost of liquidation, but this depends on how much can realistically be recovered. Answer a few quick questions and Anderson Brookes can help you assess the company’s position.
What if HMRC and Suppliers Are Already Waiting?
Unpaid invoices often cause a chain reaction. A customer pays late, so your company delays its VAT payment. You then use the next customer payment for wages, leaving suppliers unpaid. Penalties and interest may be added while creditor pressure continues to grow.
Being owed money doesn’t usually stop HMRC or other creditors from taking recovery action. They may continue to issue demands, obtain court judgments or pursue a winding-up petition while you wait for customers to pay.
If your company has tax arrears, the appropriate route will depend on whether the underlying business remains viable.
A Time to Pay arrangement may sometimes be possible where the difficulty is temporary and the company can afford both the agreed repayments and its ongoing tax obligations. If there’s no realistic way to catch up, company closure with HMRC debts may need to be considered.
Take particular care before using a recovered invoice to pay one creditor in preference to others. The circumstances and reasons for the payment matter. Professional advice can help you avoid making the position more difficult.
When a CVL May Be the Appropriate Route
A Creditors’ Voluntary Liquidation may be appropriate where the company is insolvent and cannot realistically recover. A CVL is a formal process initiated by the directors and shareholders of an insolvent limited company. A licensed insolvency practitioner is appointed to act as liquidator, deal with the company’s assets and bring its affairs to an orderly close.
It may be time to consider a CVL if:
- The company cannot pay debts as they become due.
- Customer payments won’t arrive soon enough to resolve the problem.
- The realistic value of invoices and other assets is below total liabilities.
- Trading is creating further losses.
- HMRC or suppliers are threatening legal action.
- There is no credible route back to stable and profitable trading.
Unpaid invoices don’t prevent a company from entering a CVL. They will normally be listed as assets and reviewed by the liquidator. Their expected value may affect how the process is funded and whether creditors receive a distribution.
CVLs remain the most common form of registered company insolvency in England and Wales. Of the 1,845 company insolvencies recorded in June 2026, 1,364 were CVLs.
Liquidation isn’t always the only answer. If the business is fundamentally viable and the invoices are likely to be collected soon, a repayment or restructuring option may be more suitable. Anderson Brookes can review the wider position before you commit to a formal process.
Is your company under pressure?
You don’t have to wait for the next demand or legal notice before asking for help. Answer a few quick questions and we can explain the options available for dealing with your company’s debts.
Common Questions About Liquidation and Unpaid Invoices
Are unpaid invoices classed as company assets?
Usually, yes. They represent money owed to the company. However, their estimated value may be reduced if they’re old, disputed or unlikely to be paid.
Do customers still have to pay a company in liquidation?
Yes. A valid debt isn’t normally cancelled because the company has entered liquidation. The liquidator may contact the customer with new payment instructions.
Can I collect the invoices and keep the money?
No. The invoices and any payments received belong to the company, not to you personally. Taking company money for yourself may lead to repayment demands and further investigation.
What happens if the customer disputes an invoice?
The liquidator will review the available evidence. They may challenge the dispute, negotiate a settlement or decide that further action wouldn’t produce a worthwhile return.
Can I liquidate a company that has no cash?
Yes, in many cases. The insolvency practitioner will consider unpaid invoices and other assets, as well as whether an initial director contribution is needed.
Could collecting the invoices save the business?
Possibly. If enough money can be recovered quickly and the underlying business is viable, liquidation may not be necessary. You’ll need to compare the likely receipts with all current and upcoming liabilities.
Should I continue working while waiting to be paid?
This depends on whether continuing to trade is likely to improve or worsen the position. If new work creates additional costs that the company cannot meet, creditor losses may increase. Speak to a licensed insolvency practitioner promptly.
Get a Clear View of Your Company’s Position
An empty bank account doesn’t always mean your company has no assets. Equally, a large sales ledger doesn’t guarantee that the company can meet its debts.
At Anderson Brookes, we can review your outstanding invoices, available cash, creditor balances and expected payment dates. We’ll help you understand whether the difficulty is temporary or whether formal insolvency action should now be considered.
Our licensed insolvency practitioners can explain your options clearly and confidentially. Where a CVL is appropriate, we can also discuss how unpaid invoices and other company assets may contribute towards the cost.
Contact Anderson Brookes today on 0800 1804 935 for a free, confidential conversation. You don’t need to have every figure confirmed before you call. We can help you establish the position and decide on the most responsible next step.