Many SMEs are consistently paid late by their debtors, but just how long do those unpaid invoices remain valid for?
UK businesses are currently suffering at the hands of the country’s late payment culture.
One third of the UK’s SMEs say that their invoices are not paid until two months after the agreed payment terms.
Being paid late by debtors can cause serious cash flow problems for businesses, resulting in a knock-on effect that causes SMEs to then fall into debt with their creditors too.
Having strict credit control systems and processes in place can help to encourage customers to pay on time.
However, all businesses are bound to encounter a non-paying customer at some point. If you’ve made continued payment requests to no avail, you may be wondering if there’s a time limit for collecting your payment.
How long can business debts be chased for?
Business debts are covered by the Limitation Act 1980.
According to the law, unpaid business debts can be chased for up to 6 years, providing that the following criteria have been met:
- You have maintained regular contact with the debtor, eg. sending monthly or quarterly statements.
- You can prove that you have provided the good or services being charged for.
- You have given the company time to check their records and investigate the debt.
The six year time limit starts from the date that the customer last made a payment against the invoice or acknowledged that they owed the debt, rather than when the invoice was issued.
Get help chasing outstanding invoices
If you require help with credit management, arrears prevention or debt collection, get in touch with our team of experts here at Churchill Recovery by calling us on 0333 320 0748.