Unpaid invoice, what to do?
When a company is in a business relationship, unpaid invoices can have a negative impact on its good financial health. Cash is falling and if the company does not react quickly, it too may not be able to pay its own supplier bills.
To obtain prompt payment of your invoices or avoid debts in the future, you can send your customers a follow-up for unpaid debts or start an amicable or legal collection procedure, as the case may be. GESTION CREDIT EXPERT explains how to set up an effective debt collection solution .
What is an unpaid invoice?
When an invoice is not paid in full or in part on the due date provided for in the contract, then we speak of an unpaid invoice or a debt.
Several things must be checked before initiating a debt collection procedure.
What is a claim to find out in this article.
The unpaid invoice must be certain, liquid and payable
Collecting an unpaid invoice implies that it exists, that it is founded and indisputable.
To facilitate any amicable or contentious procedure, you must prove:
- The commitment made by the customer by means of a signed contract, agreement, quote or purchase order, for example. These documents are proof of the contractualized commercial relationship between the supplier and its customer.
- Proof of delivery or service performed: delivery slip, signed attendance sheet.
- Payability of the invoice: the payment period for the debt must have expired. As a general rule, the receivable becomes payable upon receipt by your customer of the invoice.
Gathering all of these elements is certainly not mandatory in order to provide proof of the unpaid amount and to obtain payment, but it makes the procedure much faster.
Good to know: an invoice in itself cannot justify the contractual relationship. It is customary for it to be issued after delivery or completion of the service, and therefore in no way proves the initial commitment of the customer.
Unpaid invoices: what does the law say?
- The deadline for payment of an invoice must be specified in the sales contract between the supplier and its customer. In the absence of a specific agreement between the parties, the T&Cs have the value of a contract. They govern all aspects of the existing business relationship. A well-drafted contract or general conditions of sale that do not omit any clause in the event of late payment or non-payment are real ramparts against unpaid bills. The current deadline for payment of an invoice for companies is set at 30, 45 or 60 days after its issue according to the legislation in force (deadline depending on the sector of activity of the creditor).
- The debtor must perform his payment obligation. Otherwise, his creditor may initiate a debt recovery procedure and may even be subject to seizures ( art. 2284 C. civ. and L. 111-7 CPCE).
What is the deadline for claiming an unpaid invoice?
The limitation period for claims depends on the nature of the debtor:
The creditor can expect recovery within a period of:
- 5 years for commercial receivables, i.e. if the unpaid invoice results from a commercial relationship between professionals or traders, (art. L. 110-4 C. com. and 2224 C. civ).
- 2 years for civil claims , that is to say if the debtor is an individual.
What is the procedure in the event of an unpaid invoice?
If reminders to the customer have not been followed up and the invoice remains unpaid, the creditor company can issue a formal notice to pay.
The formal notice to pay
For the formal notice to be valid and produce the expected effects, it must meet very specific criteria. Otherwise, it would have no legal value and would have no binding power before the law.
To be valid, therefore, the formal notice must have a specific form and include mandatory information. This is all the more important since it is only following a formal notice that legal proceedings can be initiated by the creditor.
Several solutions allow the creditor to obtain the recovery of his claim. The preferred method to preserve both your image and your cash from any additional costs is amicable resolution.
Thus the amicable collection of debt consists in obtaining payment by mutual agreement, directly between each party or by means of the services of a third party such as a collection agency.
The advantages of the amicable procedure:
- Satisfactory : amicable resolution preserves the image of the creditor as well as its commercial relations
- Quick : the amicable procedure can find a favorable outcome to the settlement more quickly than a legal procedure
- Economical : it costs less than forced recovery.
The amicable procedure has no defined framework or maximum deadline. It is above all a question of deploying his negotiating skills.
Good to know: if at the end of an amicable procedure, the creditor and his debtor client have agreed on a strict framework to proceed with the payment of the sum of money remaining due, it is better to formalize all this in writing. A letter of acknowledgment of debt or a payment schedule constitute an acknowledgment of debt and may be useful in the event of legal action.
Judicial debt collection
If the amicable procedure has not had the desired effect for the recovery of unpaid invoices, judicial recovery may find a paying outcome.
Each situation and each type of debt corresponds to an appropriate procedure:
- The order to pay : simple, quick and inexpensive, this procedure is mainly intended for debts not disputed by the debtor and of a small amount.
- The summary provision: it allows the creditor to obtain from his debtor the urgent payment of an advance on the amount due.
- The summons for payment: collection procedure which induces a lawsuit, it is more expensive and longer. It is generally indicated for companies that have enough cash to bear the costs and for large receivables.
Why mandate a collection agency to manage your unpaid invoices?
Specialized collection companies such as GESTION CREDIT EXPERT operate as economic and social facilitators, capable of smoothing commercial relations, negotiating and finding amicable solutions so that their clients are paid quickly.
The advantages of going through a collection company:
- Free up resources: the management and amicable recovery of your unpaid debts requires resources, expertise and attention. If you do not have the right people to take charge of reminders and initiate the appropriate procedures, the outsourced services of a collection company can be a real asset.
- Save time: the collection officers who process the unpaid invoices of several customers have a perfect command of the workings of justice and have a very fine degree of technicality. They know the legislation in force by heart and know how to implement the various legal procedures . They also know how to quickly identify the action levers specific to each case of non-payment that will enable them to succeed in recovering the debt quickly.
- Optimize procedural costs: debt collection companies often benefit from preferential pricing conditions for all services provided by lawyers and bailiffs (excluding legal acts, the prices of which are regulated). They also ensure that their clients are not billed for acts that are not essential. Please note: lawyers and bailiffs can either be service providers to collection companies or their direct competitors, but not both.
A corporate creditor may need assistance in recovering outstanding amounts. Thanks to its services, GESTION CREDIT EXPERT guides you throughout the amicable or contentious procedures related to the recovery of your debts . Do not hesitate to contact us to find out more about our services.