Too many unpaid invoices can jeopardize the health of a company. When a customer is slow to pay a large sum, it's vital to act quickly to avoid weakening cash flow. There are a number of ways to recover this debt. In this article, we'll look at the services you can use to collect invoices.
What is a collection?
Once a customer has purchased goods or benefited from a service, he is obliged to pay the invoice issued to him on the due date. The company has a claim on this customer, and has the right to claim the amount due.
Debt collection is the action taken by a creditor to obtain payment of a debt from a debtor. However, this action is regulated by several articles of law.
There are different ways of collecting an invoice.
Amicable invoice collection
Sometimes all it takes to solve a problem is toestablish a dialogue with the customer. The customer may be experiencing temporary financial difficulties, or may question the quality of the product or service sold.
When the contractor knows the customer, it's better to go and see him or try to reach him on the phone than to send an impersonal reminder letter. Otherwise, the dunning letter should remain courteous and assume an oversight on the part of the customer. In fact, non-payment of an invoice is often not a question of bad faith, but a simple oversight.
On the other hand, if the reminder letter remains unanswered, you'll need to send a more formal letter of formal notice to pay. To be valid, this letter must be sent by registered post with acknowledgement of receipt, and must include the following compulsory information:
- the term "mise en demeure" ;
- identification of parties ;
- summary of the situation;
- the amount claimed ;
- payment terms.
These days, it's tempting to replace the registered letter with an e-mail by ticking the "acknowledgement of receipt" box. However, this does not guarantee receipt of the document. To provide indisputable proof, La Poste's website offers the option of sending an electronic registered letter with acknowledgement of receipt. This is the only acceptable system.
Amicable collection by a debt collection agency
There are many organizations dedicated to the amicable collection of commercial debts. Companies can join one of these organizations to relieve themselves of this thankless task.
These companies, which collect money on behalf of others, are highly regulated. A letter of formal notice is also sent to the debtor, containing the same information as above, but with the addition of :
- full contact details of the collection company;
- an indication that collection costs are to be borne by the creditor (except in the case of NSF cheques).
Some of these companies use rather "muscular" methods to impress the debtor. They present the letter in the form of a writ of execution, suggesting that it is a bailiff's deed, telephone or visit the debtor's home, and mention a possible seizure of assets...
Customers are under no obligation to use these companies to settle their debts. They can always pay their creditor directly.
Collection by bailiff
Despite his status as an officer of the court, a bailiff has no more rights than the collection company. He too will send a letter of formal notice with a summons to pay. Under no circumstances can a bailiff act without a court order and proceed with a seizure.
When a collection company indirectly poses as a bailiff, using a special sign, it is liable to a penalty for usurpation of public office (article 433-13 of the French Penal Code). Similarly, when a debtor is excessively harassed by a collection company, the debtor can invoke article 222-33-2 of the French Penal Code and accuse the company of moral harassment.
The company may prefer to turn to a bailiff, even if this represents a higher cost, to ensure that the procedure complies with the law. What's more, because of their status, bailiffs do not have the same constraints as collection agencies when it comes to presenting their mail.
Since 2015, if a debt is less than 4,000 euros, the bailiff is able to issue a document signed by him, legally attesting that an agreement to repay the debt has been reached between the two parties. This is a simplified debt collection procedure which is offered to the debtor, and is legally binding. If the debtor persists in failing to pay when due, another bailiff will proceed with enforced collection without the need to go before a judge.
Judicial collection
If all these amicable approaches fail, the creditor will have to take legal action. In this case, he appeals to the competent court closest to his home.
There are three legal collection procedures:
- Injunction to pay: less costly and quicker to implement, this is the most common method for small claims. The judge issues an injunction to pay, obliging the debtor to pay his debt.
- Summary proceedings: the judge issues a summary-provision order fairly quickly, enabling the creditor to seize the debtor's assets through a bailiff.
- Subpoena: this is a full-fledged lawsuit requiring the intervention of a lawyer and incurring substantial costs.
As we've seen, there are a number of ways for companies to recover what they owe. Which one should you choose? It all depends on the company's activity, and the extent and frequency of unpaid invoices.