Why dormant supplier open items are a hidden risk
A SME’s creditor register often accumulates open balances for years: forgotten invoices, unmatched payments, unreconciled prepayments, or disputes never closed. As long as the liability remains on the balance sheet, the debt still appears enforceable — yet the supplier may no longer be able to enforce it if limitation has run.
Under Swiss law, limitation gives the debtor a limitation defence: the claim can no longer be pursued in court, unless the debtor waives limitation (Art. 141 CO); the court does not apply it ex officio (Art. 142 CO). For accounting, keeping clearly time-barred payables artificially inflates liabilities, distorts real liquidity, and complicates audits, due diligence, and internal controls. Conversely, writing off items that are still enforceable without payment or without a legal basis exposes the company to challenges and period errors.
This guide explains how to calculate the applicable time limits for payables to suppliers, when to run a structured creditor-register cleanup, and how to document each reversal defensibly — including using tools such as Accountex to track item age, attachments, and approvals.
Relevant limitation periods for suppliers
Payables to suppliers fall under the Swiss Code of Obligations (CO). General rule: 10 years (Art. 127 CO). For certain categories of performance, the five-year term under Art. 128 CO applies instead. The table summarises the most common SME cases; special situations (warranty for defects, damages, consumer relationships) must be checked individually.
| Type of claim / payable | Indicative period | Start of running (guidance) |
|---|---|---|
| B2B supplier invoices (goods, services, works — general rule) | 10 years (Art. 127 CO) | When the claim becomes due (agreed or legally fixed maturity) |
| Performances under Art. 128 para. 1 CO (e.g. artisan work, retail sales, periodic rent, employee services owed to the employer) | 5 years (Art. 128 CO) | According to rules on when due; for rent instalments, from each instalment due date |
| Periodic rent (commercial premises lease) | 5 years per instalment (Art. 128 para. 1 no. 1 CO) | From each rent due date |
| Payables subject to acknowledgment of debt or creditor proceedings | Period restarts (interruption, Art. 135, 137 and 138 CO) | Fresh running per interruption rules (e.g. from date of interrupting act or closure of proceedings) |
| Suspension of running (Stillstand) | Running suspended or not started (Art. 134 CO) | In exhaustively listed cases (e.g. objective impossibility of enforcing the claim, written agreement to mediation); verify applicable basis |
Many B2B invoices between SMEs follow the ten-year term: Art. 128 CO must be interpreted restrictively and does not automatically extend to every “commercial” purchase. Common mistakes: confusing invoice date with the start of limitation (due date is decisive), ignoring a partial payment or acknowledgment of debt that interrupted the period, or forgetting that a supplier may still act if they interrupted limitation (e.g. betreibung, court action) within legal limits.
Interruptions and suspensions: verify before writing off
Acts that restart the period
Limitation is interrupted in particular by acknowledgment of the claim by the debtor (including via partial payment, instalments, or interest), as well as by betreibung, request for conciliation, action or defence before a court or arbitral tribunal, and registration in bankruptcy proceedings, pursuant to Art. 135 CO.
In practice: a residual bank transfer, a statement of account signed by the debtor acknowledging the balance, or written confirmation of the debt can restart the period. A simple reminder from the creditor alone does not interrupt limitation. Accounting must cross-check bank movements and document exchange before classifying an item as time-barred.
When the period does not run
Art. 134 CO provides situations in which limitation does not begin or remains suspended (Stillstand), including objective impossibility of enforcing the claim before a judge or, if agreed in writing, during mediation or other out-of-court composition proceedings.
If the supplier started betreibung, legal action, or other valid proceedings before expiry of the period, limitation was interrupted and must be recalculated (Art. 137–138 CO). Invoice age in the ERP alone is not enough to proceed with an accounting reversal.
Accounting treatment: extinction by limitation vs payment
When the debt is legally time-barred and no residual obligations remain (VAT, withholding, warranties), the payable must be removed from the creditor register. Treatment depends on how the item was originally recorded:
Typical case: expense already booked, invoice on trade payables
If on receipt you booked the expense (expense or fixed-asset account) and the payable to suppliers, extinction by limitation does not create further “cost savings” on the same document: reverse the payable to operating income (e.g. other income from payable write-offs) or per a chart of accounts consistent with Swiss GAAP/FER and internal policy. Avoid leaving both expense and payable “live”.
Items without documentary basis
Creditor balances from manual adjustments or bad imports must be reconciled first. Limitation does not “sanitise” items that never existed: absent a substantive debt, correct the posting error with separate documentation, not via the limitation procedure.
VAT and returns
If the invoice gave rise to input tax deduction, writing off the trade debt does not in itself change the right to deduction already exercised, except corrections for period errors or missing credit notes. Flag material amounts to the tax contact and verify consistency with VAT records and invoice numbering.
Operational creditor-register cleanup procedure
A cleanup project once or twice a year reduces the risk of rushed write-offs at year-end. Recommended flow for SMEs with ordinary accounts or simplified bookkeeping with a structured creditor register:
- Creditor aging extract — list of open items by age (0–30, 31–90, 91–365, over 1 year, over 5 and over 10 years from due date, per applicable period).
- Reconciliation — match payments, credit notes, set-offs and unallocated receipts; close micro-balances using an internally defined materiality threshold.
- Supplier contact (optional but prudent) — for significant amounts, email or letter requesting balance confirmation or stating intent to archive due to limitation; keep replies or lack of response.
- Internal review / audit input — worksheet per item with due date, limitation calculation, interrupting events, amount, proposed reversal account.
- Approval — owner, management or delegate by amount; for GmbH/AG document in line with statutory signing authority.
- Posting and closure — extinction entry with standard narrative (e.g. “limitation Art. 127 CO” or “limitation Art. 128 CO”), close supplier item and attach PDF worksheet in accounting software.
Accountex in practice
Filter creditors by open balance and document or due date; use item notes and attachments for legal memos and screenshots of the limitation calculation. Standardise one entry type or journal template for limitation write-offs so the balance sheet and audit trail stay uniform across periods.
After cleanup, check that supplier reports and balance on account 2000 (current liabilities) match the expected statement of financial position and that no closed item reappears from unreconciled bank imports.
Documentation and audit: what to retain
Ordinary audits and tax reviews require justification for write-offs even if the creditor no longer appears. For each extinction by limitation archive at least: copy of original invoice or supplier statement, calculation of due date and applicable period (5 or 10 years), list of verified interrupting events, dated internal approval and reference to the accounting entry.
Keep correspondence with the supplier or proof of contact attempt for amounts above company materiality. If the supplier later challenges, documentation shows you acted after diligent review and not to conceal still-valid debts.
Align cleanup policy with document retention (10 years for accounting records as a rule) and monthly close deadlines: avoid accumulating hundreds of write-offs on the last day of the financial year without traceability per item.
Mistakes to avoid and warning signs
- ×Writing off payables still enforceable because the ERP flags an “old item” without legal analysis.
- ×Confusing remission of debt (agreement with creditor) with legal limitation — accounting and VAT may differ.
- ×Leaving unreconciled negative creditor balances (receivables from supplier) that mask duplicate payments.
- ×Ignoring warranties, penalties or product recalls that keep a related claim alive.
- ×Applying blanket write-offs on the payables account without closing individual items — aging unusable the following year.
- ×Forgetting to inform procurement to avoid re-ordering from suppliers archived by mistake.
Quick checklist before write-off
| Check | Yes / done |
|---|---|
| Due date of claim identified (not invoice date alone) | □ |
| Applicable period determined (Art. 127 or Art. 128 CO) and fully run without valid interruption | □ |
| No dispute, warranty or recent acknowledgment of debt | □ |
| Bank and credit-note reconciliation completed | □ |
| Worksheet approved and entry posted with limitation narrative | □ |
| Attachments filed in accounting software (Accountex or company repository) | □ |
If in doubt on material items or strategic supplier relationships, legal counsel or auditor input costs less than a wrong write-off or an unnecessary late payment. Disciplined creditor-register cleanup makes the balance sheet more faithful to economic reality and frees time for what matters: paying active suppliers on time and negotiating terms, not managing accounting ghosts from the past.