Overdue Invoice – Part Two

In the first part of this article, we looked at what a company can do when a client fails to pay an invoice. The key is to review the documentation, communicate professionally, and establish processes that help protect cash flow.

However, when a receivable remains unpaid for an extended period, the issue takes on a broader dimension. It is no longer just about reminders or communication with the customer. Attention shifts to accounting, taxation, VAT, the quality of supporting documentation, e-invoicing, and, in some cases, legal action.

When dealing with older receivables, companies need to consider both accounting and tax implications. Businesses should monitor how long a receivable has been overdue, assess whether it is considered risky, determine whether it may be statute-barred, and evaluate whether it meets the conditions for creating an allowance for doubtful accounts.

An allowance does not mean that the company stops pursuing the receivable. Rather, it reflects in the accounting records the risk that the debt may not be recovered in full—or at all.

The tax treatment of a receivable depends on meeting specific legal requirements. For this reason, companies should maintain complete documentation, be able to demonstrate the origin of the receivable, and monitor its status on an ongoing basis.

If a company is a VAT payer and has already remitted VAT on an invoice that remains unpaid, it may, under certain conditions, be entitled to adjust the taxable amount for a bad debt. However, this is not an automatic step for every overdue invoice.

Each situation must be assessed individually. Factors include the recipient of the invoice, the nature of the supplied goods or services, whether the transaction was domestic, the amount of the receivable, the length of the overdue period, and the actions already taken against the debtor.

Here again, the quality of data and supporting documentation is crucial. If a company lacks visibility over invoices, due dates, and communication with customers, the accounting and tax assessment becomes significantly more complicated.

E-invoicing is often seen merely as a new regulatory requirement. In reality, it also represents a change in the way businesses manage invoice data.

Structured electronic invoices can help companies process information more efficiently, gain better visibility over issued and received invoices, and integrate invoice data with accounting and internal systems. This also plays an important role in the management of overdue receivables.

When invoicing processes are properly set up, companies can identify overdue invoices more quickly, determine who is responsible for follow-up actions, and access supporting documents more easily. Preparing for e-invoicing is therefore not just a technical matter—it is also an opportunity to improve invoicing practices, documentation management, and internal processes.

EMINEO PARTNERS has already discussed this topic in the podcast “E-Invoicing: What Awaits Us from 1 January 2027.” If your company is preparing for this change, we recommend focusing not only on the technical aspects of issuing and receiving invoices, but also on how invoice data can support receivables management and cash flow control.

If a customer remains unresponsive, the receivable is significant, or there is a risk that payment delays will continue, it may be time to consider further action. Possible options include a formal demand letter, an instalment agreement, set-off arrangements, assignment of the receivable, or legal proceedings.

It is important not to wait too long. Time plays a critical role not only from a cash flow perspective, but also with regard to limitation periods, the availability of evidence, and the range of available recovery options.

At EMINEO PARTNERS, we can also assist clients with the legal assessment of their situation. When reviewing receivables, we look beyond accounting and tax considerations and focus on identifying a practical, proportionate, and defensible course of action. This may include drafting a formal demand letter, preparing an instalment agreement, or evaluating further debt recovery options.

If overdue receivables are reviewed only during the annual financial closing process or when preparing the tax return, companies may discover problems too late. By that point, recoverability may have deteriorated, cash flow may have suffered, and records of communication with the customer may be incomplete.