Dealing with unpaid invoices can be a nightmare for many self-employed people. Not only can it lead to financial difficulties, including late payments to suppliers, but it also jeopardizes the survival of the business. In fact, unpaid invoices are the main cause of bankruptcy in France, according to monthly insolvency data published by the Banque de France. It is therefore crucial to recover unpaid amounts as quickly as possible in order to protect your interests. All companies, whatever their size and whatever their sector of activity, face this problem sooner or later.
As a self-employed person, you're probably wondering how to get back in touch with your unpaid invoices. This article will show you how.
What are the consequences of a large number of unpaid bills?
Whether it's a simple late payment or a doubtful debt, non-payment on time is always detrimental to a company. It inevitably disrupts internal organization and affects cash flow. Reduced working capital can lead to an overdraft, or hamper the company's ability to invest. What's more, if the company fails to meet its obligations to suppliers, relations are likely to deteriorate rapidly.
Multiple payment defaults have a significant impact on a company's financial health, as the risk of dealing with insolvent customers increases with their number. In addition to the workload of reminders by telephone, e-mail, registered mail and even legal proceedings, the accumulation of unpaid invoices creates a loss of earnings that can sometimes lead to the company going out of business.
6 steps to dunning unpaid bills
It is essential to ensure that payment terms are clearly stated on invoices.
These conditions include :
- maturity date,
- any late fees,
- and accepted payment methods.
Reminding a debtor that he owes money is no easy task. The aim is, of course, to get paid, but without losing the customer. Some customers don't pay their bills on time simply because they've forgotten, or because of temporary cash-flow problems. There's no point in rushing them. With this in mind, some customers simply send a copy of the invoice marked "reminder" as their first reminder.
1. First reminder
How long you have to wait after the due date depends on your relationship with your customer, their habit of meeting deadlines, the size of the sum owed, and sometimes the urgency of getting the money back.
A debtor in financial difficulty finds himself in a delicate situation, and the step he would have to take with his creditor, namely informing him that he is unable to honor his commitments on time, is embarrassing.
It is therefore advisable to start with a simple reminder letter or e-mail, using the pretext, for example, of an accounts receivable audit. A customer should always be considered a good payer until there is proof of bad faith. The tone used should remain courteous. We simply mention that payment has not yet been made, without emphasizing the delay. A copy of the invoice is enclosed in case the customer has not received the original. The letter ends with a warm greeting.
On the other hand, if the customer has a habit of paying late, this first reminder letter can be firmer, with a request for payment by return of post.
2. Second boost
A single reminder letter (or e-mail) is not always enough to obtain payment from the customer. A second, more insistent letter, taking into account the first, is therefore advisable.
At the time of this second reminder, the company is still in the amicable procedure phase, and the aim is to obtain a response. It must insist on the fact that it has already sent a reminder letter (some 30 days before) and expresses its surprise at not having been paid, as well as its doubt as to the customer's good faith. The amount and due date of the debt are raised again, and this time payment is requested in a more imperative manner. The notion of a payment deadline appears, although this is not really determined.
Still within the framework of an amicable procedure, the business manager can propose a debt repayment plan. This can help to recover part of the funds while preserving the business relationship. However, the polite wording used may reflect a certain coldness. This letter, sent by recorded delivery with acknowledgement of receipt, may mark the end of the amicable procedure and be accompanied by the threat to refer the case to the legal department.
3. Follow-up by telephone
If written reminders fail to produce results, you may consider calling the customer directly to discuss the problem and try to find an amicable solution, depending on your relationship with him. You should try to understand the reason for the late payment, but also remind the customer of his contractual obligations. The conversation should be open and professional.
The telephone reminder solution is quick and informal. It provides an immediate response and clarifies the situation. The aim is not to be hostile, but to listen to the customer's explanations, so as to be able to negotiate in the best possible way.
At the end of the telephone conversation, we'll conclude with something concrete and precise to formalize the mutually-agreed solution.
4. Formal notice
If letters, e-mails and telephone discussions fail, you'll have to resort to sending a letter of formal notice. This letter demands immediate payment, in categorical terms, and informs the debtor of his intention to resort to legal means.
This is an essential phase in setting up the legal case, since it starts the penalties running and makes it possible to prove the debtor's refusal to pay his debt.
The formal notice is sent by recorded delivery with acknowledgement of receipt a fortnight after the second reminder letter. The tone is firm, as it's an ultimatum, but in no way aggressive. The letter must clearly state that it is a formal notice. A precise deadline is set, as well as the amount due, and the polite formula is dry.
5. Going to court
When an amicable settlement fails to produce results, and the customer continues to turn a deaf ear, there is no choice but to take the matter to the Commercial Court judge and obtain an injunction to pay. This procedure is relatively quick and inexpensive.
The judge issues an injunction to force the customer to pay. The company can only file an application with the clerk's office of the competent court if it can prove that it has taken all steps to reach an amicable settlement, and that its claim is "liquid, certain and due", i.e., that it holds an invoice in due form with a quantified amount, and that the due date has passed.
6. Using a collection agency
If all these steps take too long or cause too much anxiety for the self-employed worker, he or she can call in a specialized collection agency to recover the payments owed.
These agencies have the expertise to handle this type of situation professionally and efficiently. They start by acting as mediators between supplier and customer, handling correspondence and formal notices.
Next, they begin the judicial collection process, which includes all legal channels for obtaining a writ of execution, such as :
- the injunction to pay procedure,
- provisional injunction,
- or payment summons.