For Agnès PANNIER-RUNACHER, Minister Delegate to the Minister of the Economy, "if companies paid their subcontractors and suppliers on time, €4 billion would go to mid-sized companies and €16 billion to SMEs." The average payment delay rose from 10 to 13 days between 2019 and 2020. That of SMEs jumped from 10.9 to 18.6 days, while large groups stand out with an average late payment of 8.1 days this year (compared to 8.9 days in 2019) .

This shortfall due to late payments and unpaid bills increases the working capital requirements of companies, slows down investments and leads to a loss of competitiveness. It can also lead to business failure.

Thus, one or more late or unpaid invoices can have a negative impact on a company's activity. Faced with such a situation, it is important for the company to put in place gradual preventive and curative measures to protect itself from the negative effects of the payment and recovery of debts.

 

The objective of collection: to obtain payment of invoices on their due date

When it comes to collections, prevention and rapid processing of late payments are key performance criteria for cash management. Prevention is better than cure. It is important to know that the customer item frequently represents between 35% and 40% of the balance sheet. It is therefore essential to regularly monitor the payment of invoices in order to reduce customer and non-payment risks. This point may seem obvious, but experience shows that this follow-up is not always implemented in small, medium or large companies.

In the following parts of this article, we will present the different forms of debt collection, from prevention to judicial and amicable procedures, in order to obtain payment of your invoice.

 

The objective of preventive dunning: to reduce payment delays to accelerate cash flow

The purpose of the preventive reminder, also called pre-litigation, is to remind customers that their bill is due.

Making a preventive reminder five days before the due date of the invoice increases the guarantees to be paid by the customer. This is often an essential step in reducing payment delays and getting the customer to pay. This approach, often wrongly considered as time-consuming and inefficient, is a real tool for the credit manager.

It thus makes it possible to anticipate upstream any dispute which could lead to delays in payment and thus avoid litigation. It also validates that the customer has all the elements to carry out the payment.

 

Out-of-court collection: 90% of unpaid or overdue invoices are collected out of court

Amicable collection without legal proceedings refers to all the actions that can be freely implemented by the company itself in order to recover the sums owed to it through negotiation. It is possible to use gradually :

  • The telephone call. This method allows for direct contact with the customer and an immediate response.
  • The letter (letter or email) written in courteous terms sometimes allows to know the reasons for the late payment and to remind the customer of the "oversight" without offending him.
  • The demand letter sent by registered mail with return receipt with the words "mise en demeure" and a deadline for payment.

This letter has a real legal value; it is compulsory in order to be able to take legal action. It is the company's last warning to its customer, before proceeding with a legal collection procedure.

This amicable collection phase has the merit of showing that the company will not hesitate to take legal action if collection fails. At the same time, it is advisable to refuse new orders from the customer or to impose a cash payment.

 

Judicial or contentious collection: in 2019, in civil matters, nearly 660,000 contentious proceedings for unpaid bills were opened

Judicial collection involves the use of the courts to recover unpaid debts, if the amicable procedure has not been successful. The chances of winning the case in court depend on the quality of the debt. Depending on the nature of the debt, several strategies are possible. Either proceed with the judicial procedure of recovery by an injunction to pay, or proceed with a writ of summons on the merits or in summary proceedings (we will see in a future article the contentious approach).

 

With the Covid-19 crisis, late payments make companies' cash flow tight

In a climate where the crisis of the Covid-19 makes the treasuries of the companies tense, the non-respect of the payment deadlines puts in danger the health of the economic actors, which can file for bankruptcy. Thus, to safeguard its cash flow, it is imperative to anticipate and reduce late payments by implementing preventive and amicable actions in order to optimize its collection while preserving its customer relationship.

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