As explained in our previous newsletters the supplier credit is a big issue in France.

For this reason it’s important to have an in house or external credit manager for the management of your French Credit Risk. The way of acting of the Credit manager was for years made under well know rules.

He checked the solvency, surveyed the mean of payment of the debtors, he checked the in house flow( Payment and delivery terms, order, delivery note, invoice etc.) and had an eye on the credit limit starting if necessary debt collection measures. The Credit manager is often in conflict with the sales people more concerned with their turnover goals than with the payment problems.

In 2017 we are in France facing a lot of major evolutions :

– Tsunami in the political scene with the disappearing of the left and right party
– Decrease of the transparency in the business life due of the fact that most of the companies are not obliged any more to publish their balance sheet.
– New rules facilitating the building up of credit between suppliers and customers.
– Due of the development of Internet new start-ups are growing like mushrooms after the rain.
– Consumers modifying their way and habits of purchasing goods and services.

In 2017 a war between credit manager and sales people is impossible.

The customer has to be seen as a partner for the supplier this is the only possibility to have in the future reliable retail organizations. Sales and Credit management have to focus and find out retailers with potential. If the retailer is in trouble the supplier has to support him by example in building up a credit, this kind of prevention is more successful than repression.

This new rules are not applicable for one shot customers.

France has 4 branches with major problems

– The fashion retail with an increase of 17 % of the bankruptcies in 2016
– The transport business (+8 %)
– The Hotels
– The food business (bakeries and butchers)

Geographically the major difficulties are located in Paris and the Parisian suburbs.

The increase of the internet sales is the major reason of those difficulties.

International Debt Collection: does it make any sense to transfer the file to a local specialist?

Wherever the debtor has his head office (in or outside the UE) it will be difficult to collect abroad an unpaid invoice.

The first difficulty is related with the foreign language. In the bookkeeping departments it’s not easy to find people speaking the language of the debtor, and it’s the same in the bookkeeping department of the buyer. Sometimes the particularities are so large that they (bookkeeper’s buyer and seller) never find a way to communicate with efficiency.

It’s Human that those guys don’t consider the foreign debtors as their priority.

The largest problems abroad are related with the court procedures and their execution.

Also in Europe you will find everywhere particularities which are impossible to be brought under control from your local lawyer. Every Country has his own way is a totally correct description of the international payment area.

Only a local specialist has the know-how to support with high efficiency the collection of your unpaid invoices.

Some Examples

– The Bailiff doesn’t exist in Spain how can I execute a verdict there?
– Due to the very high court costs in Switzerland what is he amount from which it’s economically possible to go to Court, to start a litigation procedure?
– Why can the court hearings been postponed for months in last minute before a French court
– How can I check the complicated prescription rules in Italy?
– How to deal with the police in Norway which is in charge of the execution of the verdicts ?
– Why are the appeal procedures in Spain or Greece so long lasting for 2/3 or more years?

The list is very long and the answer clear: only a local specialist gives you all the chances to collect your open debt abroad.

The Payment by check is widely used from French small businesses and from private people.

70 % of the in the EU issued Checks are coming from France.

A French person issues more or less 37 Checks a year

The main reason is that a check payment is easy and very cheap

– The Banks provides Check forms for zero cost
– Issuing a Check is free of charge
– To cash in a check is also free of charge as long as you cash it in on a French bank account.
If the Check is not covered the Bank is obliged to inform within 2 days the French national bank the “Banque de France”, and this has massive negative influence on the solvency of the debtor.

Every French bank has an access tot the Banque de France and can check before any new credit is given, if the customer had or not unpaid checks.

The green light for a credit is nearly impossible to get, if the creditor is registered on this list.

The debtor can avoid the registration on this list if he sends back to his Bank the original of the check form. In case of an unpaid check some debtors call the creditor asking him to send back the check form promising that they will wire the amount of money as soon as the check comes back.

You should never do this; ask for the transfer and then commit yourself to send the check back immediately.

Don’t forget that a check which is unpaid twice is under French law considered as a verdict and with the support of a bailiff and the proof that the check was unpaid two times you can seize the debtor.

In France it’s forbidden for the debt collection companies to charge to private individual’s collections costs.

This was ruled first from the French Supreme Court (Cour de cassation) the 20th of May 2010 for a case where the Debt collection office asked for 9.80 € fees!

Since 2014 there is a law (Loi Hamon) confirming this rule and if a debt collection company don’t respect this rule they will face

– 2 years in jail

– And a fine of 300.000 €

The collection of unpaid invoice’s vs Private individual’s is in France extremely complicated.

If the debtor moved out it will be complicated to find his new address and the search is related with more or less high costs. In every case the best information to find those debtors is the date of birth.

In case of payment delays it’s in the B to C area more important to act very quickly than in the B to B field.

With individual’s in France you should avoid the supplier credit, the payment with check and use only the payment with credit card.

There was an unpaid invoice and after the actions of a debt collection company you could cash in all the unpaid amount and interests plus costs.

The actual Question is: can you still trust to this customer, he is reliable can you again send him goods?

Fact is that a high percentage of the firms paying only after intervention of a collection company, are bankrupt within 12 months.

The percentage is between 20 and 30 %.

If you only check the statistics you will find out that the risk of not payment is 20 to 30 times higher with this kind of customers as with a normal one.

The conclusion is

– Not to deliver your goods or Services to this kind of customer cannot be false but it’s not an obligation.

– One solution is to ask for a down payment of 30 % for the first delivery “after” to check if the problem was an accident or a very serious one.

– To ask for a complete pre-payment is not efficient as long as you are in competition Market.

– But you have to be careful and you have to get extremely fresh solvency information’s about this customer.

– And you should manage this customer in a special reminder organization acting quicker and in a different way than for your other debtors.

For customers who never paid their small invoices, for customers paying only a part of the unpaid invoice, for customers needing a long term moratorium to pay their invoices there is only one solution: forget them.

On the French market, and especially for consumer goods, the supplier credit for the payment of the deliveries is the rule (more or less 60 days).

The total amount of those credits are estimated about 600 billion Euros.

The amount of definitively unpaid bills is around several billions Euros.

To avoid unpaid bill there is the necessity to apply some credit management rules.

– Before and on the delivery day you have to respect 3 major commandments

o To have a signed order form with a stamp of the customer on it

o To provide a French solvency check

o To have a signed delivery note with a stamp of the customer on it

– On due date if the bill is still unpaid you have to give a phone call to the debtor without delay

– 30 days after the due date and if the invoice is still unpaid you should transfer the file to a French debt collection office; the worse the solvency check the quickest you should initiate a debt collection process.

– Going legal for debt collection in France is quick and efficient. There is only a problem with the companies going bankrupt during the litigation procedure. But if you studied seriously the solvency check this should not happen.

– At least the major decision is about who are the customer you will deliver. Turnover makes no sense if the payment delays and the costs and efforts to cash in the money provides a negative margin. Financial and sales departments have to find a way to avoid the bad debts and the insolvent customers.

The foreclosure is usually in France about 5 years for commercial debts with some exceptions like the forwarders.

The litigation procedures are easy, more or less cheap and efficient.

Except when the debtor is totally insolvent in nearly all the started litigation procedures the creditor will get his unpaid debt and collect damages.

The only problem is related with

– The order form

– The delivery note

– The term and conditions

– The contracts if they exists

To win a court procedure in France you need those documents in French, signed and with the
commercial stamp on them.

The foreign supplier underestimate the importance of those documents.

Despite it’s the cheapest way to avoid unpaid invoices in France.

Shorter foreclosure periods exists:

1) Foreclosure related to rents, periodic payments and the right to compensation for damages deriving from non-contractual liability is 5 years.

2) Foreclosure for rights deriving from transport and rights that arise from the insurance contract is 1 year.

The law in Italy also foresees the institution of presumptive limitation between 6 months and 3 years. In these cases, with the course of time, it is assumed that the debtor has paid but rebuttal evidence of oath is admitted. However, if the debtor swears he paid, there is no solution. The right of hotelkeepers concerning the accommodation is limited to six months; the right of shop owners to sell goods to those that do not trade them is maximum one year; the right of professionals to their compensation is limited to three years.

The parties CANNOT modify the foreclosure period by mutual agreement.

The foreclosure is interrupted when you submit a request for payment to the debtor by registered mail with acknowledgment of receipt or in using a certified email address. From receipt of such request, a new limitation period begins with equal duration to the original one

If the debtor still don’t pay you can start the judicial phase, if the debt is documented (contract, orders, invoices, delivery note, accounting records, correspondence, etc.). You have to ask to the Court (Justice of the peace up to 5.000 Euros and Court for amounts above) to issue an Order to Pay. Within 30 days the Judge will issue the order and then you have 60 days to notify. After 40 days without opposition the order becomes enforceable.

For debts over 30.000 Euros, you can file for bankruptcy after fruitlessly attempting enforcement against the debtor.