Time limits for recovering unpaid invoices: What small businesses need to know
Unpaid invoices can be very disruptive for businesses and chasing overdue payments can take up valuable time and resources. But did you know that there is a time limit for businesses to legally recover outstanding debts?
The six-year rule: Statute of Limitations Act
In Ireland, under the Statute of Limitations Act 1957, a business has six years to initiate legal proceedings to recover an outstanding debt.
After the six years have passed, the debt becomes statute-barred. This means legal action can no longer be taken, even if the money is still owed.
When does the time limitation begin?
The clock for the statute of limitations starts ticking on the due date of the invoice, not the issue date (unless no payment terms were specified). For example, if an invoice issued on 1st January is payable within 30 days, the six-year period would begin on 31st January, the day after it becomes overdue.
Acknowledgments and part-payments
There are circumstances where the six-year period can be extended. If the debtor makes a written acknowledgment of the debt or a part-payment, the limitation period may restart from that date. That’s why it is essential to keep accurate records of any such communications or transactions, as well as invoice issue dates and payment due dates.
Why early action is important
As time goes on, debtor contact details can change, documents could go missing, and disputes become harder to resolve. Also, legal proceedings can take time to prepare, so acting early gives your debt recovery team the best chance of success.
Does your business need help recovering unpaid invoices?
Time limits are not just a legal technicality; they can be the difference between recovering a debt and writing it off. If your business is dealing with unpaid invoices, it is important to act quickly and seek legal advice.
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This article's author, Michelle Ryan is Client Relationship Manager at Carlisle Solicitors, founded in 2017 and dedicated solely to providing debt recovery services to small and medium sized businesses. Carlisle Solicitors is part of the Tracey Solicitors LLP group, proud member of the SFA and in operation for 35 years.
