Collection agencies help you to recover funds you would have to write off.

When appropriately used a cooperation with a commercial overdue collection company can be a maximized resource for your own company. But you have to respect some basic rules to make a common profit out of the started actions.
• Place the accounts at the right time not to soon and not too late.
• Deliver all the pertinent documentation and a background story
• Trust the advice and counsels of the collection professionals
• Don’t go directly in touch with the debtor when he is in the hands of the agency
• Make the cooperation not with extreme old invoices, give the agency a chance to collect the receivables and start a long term relationship. Changing permanently the agency is not a positive point.
The commercial collection agency will help you to focus on the reliable customers paying their invoices on time. If a customer you have sent to the collection company contacts you it’s because he doesn’t want to deal with them. Accepting to start negotiations is a very bad point because the same customer will start this game again. And at least he will be the winner earning a free credit giving him and advantage toward his competitors.

Collecting bad debts is difficult. A lot of received amounts will never be paid no matter what tactics are utilized. Instead to test an agency with the oldest files, send them files they can collect because it’s the reason for what you made a deal with them.

Since 2012 it’s foreseen in the French law that the collection costs, lawyer and success fee, have to be charged to the debtor.

In the first years after this new law we had to face massive opposition from the judges. You have to know that concerning business and commerce the judges are not professional ones but local entrepreneurs elected from their pairs.

In numerous judgments the commercial courts refused to take consideration about the debt collection costs.

Till the year 2014 there was nearly no single judgment charging the debtors with the collection costs.

The Commercial Court from Paris was leading in this matter refusing systematically the demands to cover for the creditors the collection costs.

Since 2016 the situation is moving very fast and a lot of judgments agree to charge the collection costs including the success fee to the debtor.

The Courts from Paris changed completely their minds and accept in nearly every file to charge the collection costs to the debtor.

But the creditor has the obligation to provide to the Court all the information concerning the costs he has to pay including the agreement with the debt collection company.

The major concern is hat the creditor is obliged to start a litigation process related with costs. A great judgment is senseless if at the end the debtor has no sizable assets.

For that reason it’s necessary to get in advance a professional advice about the chances to collect the money after the running of a litigation procedure, this kind of procedure lasting in France for one to one and a half year.

The small amounts are excluded because it makes no sense to go to Court when the unpaid debt is low.

Georges Vonfelt
www.gevo.fr

In France you have the obligation to let the customer sign the quotation on which you both agreed.

If not you will face major difficulties to prove that the customer accepted the amount of the carried out works.

The highest French Court called the „ Cour de Cassation «had to rule about the following facts: An Artisan made for a Farmer a renovation of a building without a signed quotation. At the end of the renovation the farmer refused to pay the bills arguing that he never agreed with those works.

The artisan was only able to provide testimonies from other people working there.

The Court decide that this is not sufficient to prove that the Farmer agreed about the works because for a quotation for more than 1.500 e the signature of the customer is mandatory.

The artisan couldn’t get paid for his Job.

The Judgment was issued the 11 October 2017 under the Number 16-22507.

Conclusion: in France you have to get as many signed writings and documents as possible to prove your debt and to have the best chances to get paid.

When an invoice remains unpaid, entrepreneurs often underestimate the cost for their firm. The direct consequences on the profit are easy to apprehend. Nonetheless, it is enlightening to take into account the additional margin rate and turnover to undertake in order to erase the loss endured.

In the hereinbelow example we analyse the situation of a company whose annual turnover is 6.000.000€ and supports several outstanding debts for a total of 45.000€.

If its margin rate in relation to its turnover is of 5%, it will have to increase their sales of 900.000€ in order to soak the consequences of these outstanding debts up.

It will be necessary that the commercial team assume a 15% growth of the turnover in order to compensate the endured losses. It is undeniable that this aim/goal will be hard to achieve in a competitive market. Not only these outstanding debts will cause damage to the profit and the financial situation of the firm but also they can displease the sales force.

The process which consists in mandating a debt collection company is made with lots of reluctance:

• The firm is afraid that the client/customer relation will be disturbed

• The cost seems considerable especially in countries like France where it is very difficult to bear the recovery costs to the debtor who isn’t paying his/her invoice.

To call on a debt collection company is like entrusting the management of a staff canteen to the caterer. It becomes essential if we want to focus on our core business, to let the specialists do the tasks which the firm does not necessarily have the internal skills for.

If the invoices to be recovered are sent to the debt collection company in a reasonable period after the outstanding debt’s due date, it is likely that in the hereinabove example, an amount between 25.000 and 30.000€ free of costs can be recovered. Needless to say that it will depend on the file’s quality and the fact that all cannot always be collected.

In most cases, the recourse to a debt collection company will help improve the viability and the treasury of the firm.

Finally, a low loss ratio will enable the company to negotiate a lower rate for its credit insurance bonus insofar as it has subscribed to such agreement.

The since July 2017 available figures are the best ones since 20 years, describing a fast recovery of the French economy. The number of bankruptcies is reduced (- 7.8 %) and the tendency is increasing.

And for the first time small companies between one and ten employees are also facing the same evolution despite the fact that on the end of 2016 and the beginning off 2017 those firms where in a chaotic situation.

More orders and more cash are the actual facts.

And at least the very small businesses with less than 3 employees are also in the same situation the number of bankruptcies was reduced about 6.7 %.

The winners are companies with 50 to 99 employees for those ones the number of the bankruptcies are reduced about 34 %.

This economic recovery will have a positive influence on the unemployment rate.

Today the global wages for private housekeeping are on 2 % progress rate.

Nearly every economic area takes advantage from this evolution:

– The House Building
– The retail shops mainly in the do it yourself area
– The industry for manufactured goods.

397.700 new flats are ordered (+14 %) and the car producing factories are more or less on the top of their capacity.

The Business Manager were never as optimistic since 2011.

One small trick: the French summer hole is also a period where the payment delays are the highest be still careful.

In France the foreclosure for commercial debts is about 5 years.

But they are a lot of other time limits in France that you have to be aware off to secure your payments. It is extremely difficult to get from a judge the skipping of the foreclosure.

You face the risk that your debt is considered as not existent.

If your customer sells his business (goodwill) you have 10 days after the official publication (BODACC) to stop the distribution of the price if you have an unpaid invoice.

This process blocks everything and you are sure to be paid if they are not more unpaid bills as the total amount of the selling price.

If your customer is bankrupt you have 2 months (4 for foreigners) to declare you debt to the receiver.

If you use the very popular injunction procedure you have six months to let the debtor informed via a Bailiff. The debtor can raise opposition within one month and if he doesn’t you have 2 months to ask for the execution.

If the debtor raises opposition you have 15 days to inform the court if you want to go ahead or not with the procedure.

The conclusion is that it’s better and more efficient to manage your open debts in France via professionals as lawyers, debt collection office or bailiff.

The permanent survey of the official publications concerning your customers is also a necessity.