<p>Late payment penalties are financial compensations applied by a creditor to a debtor when the latter fails to meet the agreed payment deadlines for settling an invoice. Their purpose is to deter late payments and compensate the creditor for the financial harm caused by the delay. Don’t miss our <a href="https://www.billabex.com/en/blog/accounts-receivable-management">comprehensive guide on following up on unpaid invoices</a> and our <a href="https://www.billabex.com/en/blog/legal-framework-for-unpaid-invoices-in-france">Legal Framework for Unpaid Invoices in France</a>.</p>
<h2 id="legal-framework-for-late-payment-penalties">Legal Framework for Late Payment Penalties</h2>
<h3 id="payment-deadline">Payment Deadline</h3>
<p>Article L441-10 states that, unless otherwise agreed by the parties, the payment deadline for amounts due should not exceed:</p>
<ul>
<li><strong>30 days</strong> after receipt of the goods or completion of the service.</li>
<li><strong>60 days</strong> after the invoice date, if contractually agreed.</li>
</ul>
<p>An exception allows for a maximum delay of <strong>45 days end of month</strong> after the invoice date, provided this period is expressly stipulated by contract and does not constitute a clear abuse. Check out our detailed article on <a href="https://www.billabex.com/en/blog/legal-payment-terms-for-invoices-in-france">the legal deadlines for invoice payments in France</a>.</p>
<h4 id="legal-interest-rate">Legal Interest Rate</h4>
<p>The legal interest rate is a reference rate set by the authorities in France. It is used to calculate interest owed on certain debts, particularly in cases of late payment, when the parties have not agreed on another rate in their contracts.</p>
<p>The legal interest rate is set semi-annually by ministerial order and may vary depending on economic conditions.</p>
<p>Two distinct rates are generally set:</p>
<ul>
<li>For claims by individuals not acting for professional needs.</li>
<li>For all other claims, including those between businesses.</li>
</ul>
<p>Example of Rates for the Second Half of 2024:</p>
<ul>
<li><strong>8.16%</strong> for claims by individuals not acting for professional needs.</li>
<li><strong>4.92%</strong> for all other cases.</li>
</ul>
<h4 id="late-payment-penalties">Late Payment Penalties</h4>
<p>The payment terms must include the interest rate for late payment penalties, which are due the day after the payment date indicated on the invoice. This rate cannot be less than <strong>three times the legal interest rate</strong> and is generally equal to the rate applied by the European Central Bank (ECB) plus 10 percentage points.</p>
<p>For the second half of 2024, the legal interest rates are set at:</p>
<ul>
<li><strong>8.16%</strong> for claims by individuals not acting for professional needs.</li>
<li><strong>4.92%</strong> for all other cases.</li>
</ul>
<p>Late payment penalties are due without a reminder, and any payment delay automatically incurs a flat-rate compensation for collection costs, set at <strong>40 euros</strong>. Check out our detailed article on <a href="https://www.billabex.com/en/blog/flat-rate-compensation-for-collection-costs-in-france">the flat-rate compensation for recovery costs in France</a>.</p>
<h3 id="specific-deadlines">Specific Deadlines</h3>
<p>Article L441-11 provides specific deadlines for certain sectors, particularly for perishable agricultural and food products, where the maximum period is <strong>30 days</strong> after delivery. Other sectors, such as agricultural equipment and toys, have specific deadlines up to <strong>110 days</strong> end of month after the invoice date.</p>
<h3 id="procedures-and-sanctions">Procedures and Sanctions</h3>
<p>Articles L470-1 and L470-2 define the procedures and sanctions for non-compliance with payment obligations. Authorized agents may order a professional to comply with their obligations under penalty of administrative fines:</p>
<ul>
<li><strong>3,000 €</strong> for an individual.</li>
<li><strong>15,000 €</strong> for a legal entity.</li>
</ul>
<p>In the event of non-compliance, a daily penalty may be applied, which can reach <strong>0.1%</strong> of global turnover excluding taxes, and the total penalty cannot exceed <strong>1%</strong> of this turnover.</p>
<h2 id="calculation-of-late-payment-penalties">Calculation of Late Payment Penalties</h2>
<h3 id="calculation-method">Calculation Method</h3>
<p>The calculation of late payment penalties is based on the invoice amount, the number of days of delay, and the applicable interest rate. The formula is:</p>
<p>Late payment penalties = (Invoice amount x Penalty rate x Number of days late) / 365</p>
<h3 id="calculation-example">Calculation Example</h3>
<p><strong>Situation:</strong> Company A invoices 10,000 € to Company B, with a payment term of 30 days. The payment is made 15 days late.</p>
<ul>
<li><strong>Invoice amount:</strong> 10,000 €</li>
<li><strong>Penalty rate:</strong> 10.5% (ECB rate + 10 points)</li>
<li><strong>Number of days late:</strong> 15 days</li>
</ul>
<p>Late payment penalties = 10,000 x 0.105 x 15 / 365 = 43.15 €</p>
<p>In this example, Company A can legitimately claim 43.15 € in penalties from Company B.</p>
<h2 id="importance-of-mandatory-mentions">Importance of Mandatory Mentions</h2>
<p>The payment terms must explicitly mention the penalty rate and the flat-rate compensation for collection costs. Failure to do so exposes the company to administrative sanctions and prevents them from claiming penalties.</p>
<h2 id="consequences-of-non-compliance-with-payment-deadlines">Consequences of Non-Compliance with Payment Deadlines</h2>
<h3 id="sanctions">Sanctions</h3>
<p>Companies that do not respect payment deadlines are subject to administrative fines and daily penalties. Sanction decisions can be published on the competent authority's website, and this publication is at the expense of the concerned professional.</p>
<h3 id="impact-on-business-relationships">Impact on Business Relationships</h3>
<p>Late payments can damage the company's reputation and affect its relationships with suppliers, who may decide to reduce credit terms or impose stricter payment conditions.</p>
<h3 id="recourse-for-creditors">Recourse for Creditors</h3>
<p>Creditors have several recourses to recover late payments, including the application of late payment penalties and initiating legal proceedings. However, these remedies can be costly and time-consuming. Check out our detailed article on <a href="https://www.billabex.com/en/blog/provisional-order-in-france">the provisional order in France</a> and our detailed article on <a href="https://www.billabex.com/en/blog/the-order-for-payment-procedure-in-france">the order for payment procedure in France</a>.</p>
<h2 id="best-practices-for-managing-late-payment-penalties">Best Practices for Managing Late Payment Penalties</h2>
<h3 id="implementing-internal-processes">Implementing Internal Processes</h3>
<p>To avoid late payments, it is crucial to implement rigorous internal processes, such as automating billing, centralizing payments, and having an effective follow-up system.</p>
<h3 id="negotiation-with-suppliers">Negotiation with Suppliers</h3>
<p>Companies can negotiate longer payment terms with their suppliers, but this must be done transparently and with a clear justification to avoid any tension.</p>
<h3 id="monitoring-legal-developments">Monitoring Legal Developments</h3>
<p>It is important to stay informed about legal developments regarding payment deadlines and penalties to ensure compliance with business practices.</p>
<h3 id="employee-training">Employee Training</h3>
<p>Training employees on managing payment deadlines and late payment penalties is essential to ensure consistent and effective application of internal policies.</p>
<h2 id="conclusion">Conclusion</h2>
<p>Late payment penalties are a crucial tool to ensure compliance with payment deadlines and protect creditors. Companies must ensure that all mandatory mentions are included in their payment terms and comply with legal deadlines to avoid costly penalties and maintain business relationships. By adopting rigorous payment management practices, they can minimize financial risks and maintain a solid market reputation.</p>
<h2 id="faq">FAQ</h2>
<h3 id="1-what-are-the-legal-payment-deadlines-in-france-">1. What are the legal payment deadlines in France?</h3>
<p>The legal payment deadlines are 30 days after receipt of goods or service delivery, which can be extended to 60 days by contractual agreement.</p>
<h3 id="2-what-are-the-penalties-for-late-payment-">2. What are the penalties for late payment?</h3>
<p>Penalties include late payment interest, calculated at a rate equal to the legal interest rate plus 10 percentage points, and a flat-rate compensation of 40 € for collection costs.</p>
<h3 id="3-how-to-avoid-late-payment-penalties-">3. How to avoid late payment penalties?</h3>
<p>To avoid late payment penalties, respect payment deadlines, include mandatory mentions in payment terms, and implement effective management processes.</p>
<h3 id="4-what-to-do-in-case-of-recurring-late-payments-">4. What to do in case of recurring late payments?</h3>
<p>Strengthen internal controls, improve communication with clients, and reassess the credit terms granted.</p>
<h3 id="5-how-are-late-payment-penalties-calculated-">5. How are late payment penalties calculated?</h3>
<p>Penalties are calculated based on the invoice amount, the number of days of delay, and the applicable interest rate.</p>
