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Dealing with late payers

We explain the options that are available, both before and after the work is done, to stamp out late payments

THE FRENCH government and the European Union have taken a close interest in the issue of late payment and the effect it is having on business survival.

Prompted by the economic crisis, Brussels has agreed a new 30-day payment deadline for public bodies, while the 2008 modernisation law in France brought down the maximum payment delay for all businesses from 90 to 60 days.

There are several steps available that should help you avoid lengthy and costly legal proceedings.

Do your research: To help reduce the cost and time spent chasing late bills, there are a number of checks that can be made before you start working for a client.

This should give you a better idea of whether they will pay. The first port of call is the registre du commerce, which lists every business in France.

It can be consulted, free of charge, at and provides all the legal information relating to the business, including the names of its directors and details of the firm’s principal activities.
For a few euros, you can download a company’s annual accounts, but bear in mind that the most up-to-date documents filed could still be at least a year old. A firm’s solvency can change overnight.

The tribunal de commerce in the town where the business is registered will hold information about any claims made against the company for unpaid debts. The Sécurité Sociale and the Trésor Public should also be able to confirm whether a company has unpaid tax or social security contributions.

Another approach is to make contact with an agence de renseignements commerciaux: these are private companies that specialise in investigating a business’s financial status.

On your terms: Getting the wording right in your commercial documents is essential. It is a legal requirement for your business to have a set of general terms and conditions (conditions générales de vente). These must be consistently applied to every client, and customers can ask to see a copy.

The conditions should include details of your payment terms and any eventual discounts for early payment or penalties for paying late. These details should also appear on any quotes (devis) you provide or on order forms (bons de commande).

You should ask customers to sign the quote you provide or an order form to confirm they are happy for the work to begin. This will act as proof that the order was approved if the case later goes to court.

You should also provide a bon de livraison and ask for it to be signed, to prove that you provided what was ordered within the agreed timeframe.

Keep a database of every client you work with and all of the correspondence you have with them. This will help you build up a clear picture of which clients are the best and worst payers and will also make it easier to keep a track of invoices and send them out promptly.

It is a legal requirement for the invoice to include details of the due date and the penalties for being late. There is a minimum level of penalty fixed by French law, which comes into force from the morning after the deadline. The rate is the European Central Bank refinancing rate plus 10 percentage points, or three times the French legal interest rate – whichever is greater. At the time of writing, the first option is the highest. It works out at 11 per cent (one per cent plus 10), while the second option produces just 1.95 per cent.

This 11 per cent penalty is a minimum rate. French law allows you to set your own higher penalties; however, they must be clearly communicated to the customer before they agree to the order.

The chase begins: Call a few days before the invoice is due as a polite reminder. Two or three days later, send your first letter. It is recommended that you write to the client at least three times, and follow up each letter with a phone call, before proceeding to the next step.

The legal options: About three weeks after the invoice has become overdue, the next step is to send a mise en demeure (a formal legal notice) by registered letter with proof of delivery (lettre recommandée avec avis de réception). This reminds the client of the overdue debt and asks that they pay it, typically within a week. It also warns them of impending legal action if the bill goes unpaid. You can write this yourself, but there are model letter templates online.

If your client is having difficulty paying, you might find it beneficial to discuss new payment terms instead of going straight for the legal avenue, with all the costs involved. Accept any offer to pay in instalments. Draw up a repayment timetable with the first instalment due immediately and ask the client to sign it. Offering concessions at this stage will prove less costly than pursuing the full debt in legal action.

If the mise en demeure fails to work, the next step is to obtain an injonction de payer or titre exécutoire (repayment order) from a judge. This is a relatively fast, cheap procedure, similar to the small claims court in England and Wales, and does not require a lawyer.

Your local tribunal de commerce will have a standard template for an injonction de payer, which you can fill in yourself. Keep good records of when each bill is due and the actions you have taken to recoup them, and provide all the supporting documents with the claim.

The case is considered by a judge at the tribunal de commerce when the customer is based and you do not need to be present. The order can be served very quickly if the case is straightforward.

The injonction de payer from the judge should then be passed to a bailiff (huissier de justice) of your choosing, who serves it on the customer. The cost is about e100-e150, so this is best reserved for large debts.

If a client refuses to pay, a further option is to lodge a creditors’ winding-up order (procédure de redressement judiciaire). This needs to be very carefully prepared: you will need all the documents you can get on the debt and all the correspondence exchanged.

Often a firm will pay up instantly to avoid being forced into administration. However, if the business is genuinely in financial difficulty and goes into administration, your chances of getting back overdue bills are relatively slim. You will have to register with the administrator as a non-preferential creditor and the tax and social security authorities have priority for any money that is freed up.

Invoice factoring

More than 20,000 businesses in France use a service called affacturage (invoice factoring) to free up cashflow and deal with debts. It is a big industry, representing more than €100bn in invoices a year.

Factoring firms act as an intermediary and chase bills on your behalf. They charge an annual fee, based on your turnover, and a fee on each invoice. They typically pay about 80 per cent of the invoice value upfront.

Before agreeing to work with you, the firm will ask to see full details about your business, who your clients are and your cashflow situation. They can reserve the right to refuse certain debts belonging to customers known to be bad payers.

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