The Accounts Receivable Management: Recovering Your Money

As an entrepreneur, manager, or business leader, one of the major challenges you often face is the recovery of unpaid invoices. These payment delays (as they almost always eventually get paid) can severely affect your cash flow and threaten the sustainability of your business. However, it is possible to implement effective strategies to recover your money while maintaining positive business relationships with your clients. This guide will provide you with practical advice, proven strategies, and tools to optimize your collection processes.
<h2 id="winning-strategies-https-www-billabex-com-en-blog-strategies-for-debt-collection-for-following-up-on-invoices">Winning <a href="https://www.billabex.com/en/blog/strategies-for-debt-collection">Strategies</a> for Following Up on Invoices</h2>
<h3 id="amicable-collection-the-gentlest-yet-most-effective-method">Amicable Collection: The Gentlest Yet Most Effective Method</h3>
Amicable collection (or amicable follow-ups) is the first step to recovering your debts without resorting to legal procedures. It relies on regular and personalized communication with the client to remind them of their overdue invoices.
<h3 id="judicial-collection-when-patience-has-its-limits">Judicial Collection: When Patience Has Its Limits</h3>
If amicable follow-ups fail, consider moving to judicial collection. This approach should be carefully considered, as it can clearly affect the business relationship with your debtor (who is also, after all, your client).
<h3 id="preventive-collection-better-safe-than-sorry">Preventive Collection: Better Safe Than Sorry</h3>
Preventive collection aims to avoid unpaid invoices from the outset by adopting rigorous business practices.
Some examples of preventive practices to implement include:
<ul>
<li>Include clauses on payment terms and late payment penalties in your contracts.</li>
<li>Check the solvency of new clients before signing a contract with them.</li>
<li>Offer automatic debits or credit card payments to secure your transactions.</li>
</ul>
<h2 id="effective-follow-up-techniques">Effective Follow-up Techniques</h2>
Effective communication is crucial to obtaining your payments while preserving the client relationship. Here are some tips to optimize your follow-ups:
<ul>
<li>Be Prepared: Gather all the information on the invoice before contacting the client. Ensure there are no errors or misunderstandings.
</li>
<li>Personalize Your Messages: Show that you understand the client's specific situation by adapting your tone and content.
</li>
<li>Stay Professional and Respectful: Avoid accusations; remain factual and courteous.
</li>
<li>Choose the Right Communication Channel: Adapt to your client's preferences: email, phone, SMS, or mail.
</li>
<li>Be Consistent in Your Follow-ups: Schedule reminders based on the due date and adjust the frequency according to the situation.
</li>
<li>Adopt a Progressive Approach: Start with gentle reminders, then increase pressure if necessary.
</li>
</ul>
Check out our <a href="https://www.billabex.com/en/blog/tips-for-following-up-on-unpaid-invoices">Tips for Following Up on Unpaid Invoices.</a>
<h2 id="step-by-step-follow-up-process">Step-by-Step Follow-up Process</h2>
To maximize your chances of recovery, follow a well-structured process:
<ol>
<li>Identify Unpaid Invoices: List overdue invoices and check for errors.
</li>
<li>First Follow-up: Send a polite email to remind the client of the missed due date. Ensure your communication is clear and professional.
</li>
<li>Phone Follow-up: Make a follow-up call to discuss the reasons for the delay and propose suitable solutions.
</li>
<li>Second Follow-up: If the first attempt fails, send a registered letter using another channel. Offer solutions like a payment plan or a reduction in penalties.
</li>
<li>Formal Notice: In case of failure, send a formal notice respecting legal formalities.
</li>
<li>Judicial Recourse: If all these steps do not succeed, consider moving to the judicial phase by hiring a lawyer or a collection agency.
</li>
</ol>
Check out our <a href="https://www.billabex.com/en/blog/reminder-templates">Reminder Templates for Unpaid Invoices</a>.
<h2 id="essential-tools-for-optimizing-your-follow-ups">Essential Tools for Optimizing Your Follow-ups</h2>
With technological advancements, it is now easier to effectively manage invoice follow-ups. Here are some tools and features to consider:
<ul>
<li><a href="https://www.billabex.com/en/blog/debt-collection-software">Collection Software</a>: Use tools like Highradius, Billtrust, or <a href="https://www.billabex.com">Billabex</a> to automate the sending of reminders and track unpaid invoices in real-time.
</li>
<li>Automated Follow-ups: Set up personalized automatic reminders for clients with late payments.
</li>
<li>Customer Relationship Management (CRM): Integrate a CRM system to track client interactions and maintain a payment history.
</li>
<li>Reports and Analytics: Assess the effectiveness of your collection processes with detailed reports and adjust your strategies accordingly.
</li>
<li>Accounting Integration: Ensure integration with your accounting systems for smooth payment management.
</li>
<li>Client Portal: Provide your clients with online access to view and pay their invoices easily.
</li>
</ul>
<h2 id="legal-aspects-and-creditor-obligations">Legal Aspects and Creditor Obligations</h2>
<h3 id="important-legal-aspects">Important Legal Aspects</h3>
The legislation on payment terms is a crucial point for any business. In France, it is primarily governed by the Commercial Code. Payment terms between professionals are generally set at 30 days after the receipt of goods or completion of the service. However, this period can be extended up to 60 calendar days, provided it is expressly stipulated in the contract and is not abusive to the creditor.
The starting point for calculating payment terms is generally the date of receipt of the goods or completion of the service. However, in some cases, the period can be calculated from the date of invoice issuance. The general terms of sale (GTS) must specify the applicable payment terms and be communicated to the client before concluding the contract.
In case of non-compliance with legal deadlines, businesses are subject to administrative sanctions. The DGCCRF (General Directorate for Competition Policy, Consumer Affairs, and Fraud Control) is responsible for monitoring compliance with payment terms. Fines can reach up to 2 million euros for repeat offenders.
To deter payment delays, the legislation provides for late payment penalties and a fixed recovery fee. Late payment penalties are calculated based on the legal interest rate plus 10 points. They are due without the need for a reminder from the first day of delay. In addition to these penalties, the creditor can demand a fixed compensation for recovery costs, set at 40 euros by European legislation.
It is important to note that some sectors benefit from specific payment terms, adapted to their economic and logistical constraints. For example, in the agri-food sector, deadlines are often shorter to ensure product freshness. The construction sector, on the other hand, is subject to particular regulations due to the specifics of its activities.
<h3 id="rights-and-obligations-of-creditors">Rights and Obligations of Creditors</h3>
As a creditor, you have rights but also obligations. You have the right to recover amounts owed by debtors, including sending reminders, issuing formal notices, and resorting to judicial proceedings if necessary. You can also charge late payment interest in case of delayed payment.
Since 2013, you also have the right to demand a fixed compensation of 40 euros to cover recovery costs in case of late payment. As a last resort, you can initiate legal actions to recover unpaid debts.
However, these rights come with obligations. You must be transparent in your recovery efforts, clearly informing the debtor of the amounts due, applicable late payment interest, and recovery fees. You are also required to comply with legal deadlines for sending reminders and formal notices.
It is crucial to respect the rights of debtors, avoiding any form of harassment or excessive pressure. You must follow legal and ethical procedures. Finally, you must be able to provide proof for all the claims you make, including invoices, contracts, and any other relevant documentation.
Check out our <a href="https://www.billabex.com/en/blog/legal-framework-for-unpaid-invoices-in-france">Legal Framework for Unpaid Invoices in France</a>.
<h2 id="code-of-ethics-ethics-at-the-heart-of-recovery">Code of Ethics: Ethics at the Heart of Recovery</h2>
A code of ethics governs the practices of collection professionals. Its goal is to ensure that collection actions are conducted ethically and with respect for debtors' rights.
<h3 id="key-principles-of-the-code-of-ethics">Key Principles of the Code of Ethics</h3>
<ul>
<li>Respect and Courtesy: Maintain a respectful attitude during interactions with debtors. Avoid any form of pressure or threat.
</li>
<li>Confidentiality: Protect the personal and financial information of your clients and debtors.
</li>
<li>Transparency: Clearly communicate the amounts due, payment deadlines, and consequences of non-payment.
</li>
<li>Legal Compliance: Adhere to all laws and regulations regarding collection. Ensure that your practices comply with established standards.
</li>
</ul>
Collection agents must be trained and competent, knowledgeable about current laws and regulations as well as best practices in debt recovery. They must avoid abusive practices and respect the legal rights of debtors.
<h2 id="practical-tips-for-optimizing-your-follow-ups">Practical Tips for Optimizing Your Follow-ups</h2>
Finally, here are some practical tips for optimizing your follow-up process:
<ul>
<li>Establish Clear Credit Policies: Define precise payment terms and communicate them clearly to your clients at the start of the business relationship.
</li>
<li>Invest in an Automated Tracking System: Use software that alerts you of overdue invoices to facilitate follow-up management.
</li>
<li>Personalize Your Follow-ups: Tailor the tone and content of your communications based on the client relationship and payment history.
</li>
<li>Offer Flexible Solutions: Provide payment plans or conditional discounts to facilitate the settlement of overdue invoices.
</li>
<li>Maintain Proactive Communication: Send reminders before the due date and keep regular contact with your clients.
</li>
<li>Train Your Team: Equip your staff with effective communication techniques and negotiation skills.
</li>
<li>Analyze and Adjust Your Strategies: Monitor key performance indicators and gather client feedback to continuously improve your follow-up process.
</li>
</ul>
By following these tips and using the right tools, you will optimize your follow-up process, reduce payment delays, and improve the financial health of your business. Remember: the key to effective follow-up lies in balancing firmness and diplomacy. Happy hunting for unpaid invoices!

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Article written by

Yassine Chabli

CEO and co-founder of Billabex. Serial entrepreneur in the SaaS world. Mentor at Moovjee, startup coach at the Institut Mines-Telecom (IMT) incubator, investor, and ambassador for France at saas.group.

The Accounts Receivable Management: Recovering Your Money

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