What are the invoice payment deadlines?
What do you need to know about payment terms, those little lines that appear in general sales conditions (GSC), contracts and invoices?
Payment terms are governed by current legislation, which stipulates the maximum length of time that any company may allow for its commercial relations, unless otherwise stated or specifically agreed.
What are the different types of payment terms ? How are they applied and calculated? What financial or administrative penalties may apply in the event of non-compliance?
Take a closer look at their specific features, so that you can understand and apply them with full knowledge of the facts!
What payment terms apply to companies?
In accordance with the French Commercial Code, the default payment term applicable between business partners (BtoB) is 30 days following completion of the service or sale of a product.
This period runs from the date of issue of the invoice, which is one of the compulsory terms it must include.
Payment terms can be negotiated between companies. Here are the payment terms applicable between companies (source: service-public.fr):
Cash payment
A company may choose to apply cash payment in the context of an inter-business relationship. This means that the amount due to the seller must be paid immediately by the customer, in a single inst alment, on the day of delivery of the goods or service.
Payment on receipt of invoice
If the parties opt for payment on receipt of invoice, the customer must pay the invoice as soon as it is received. As a general rule, the purchaser has a period of one week from the date of dispatch of the goods or service.This period includes the time until receipt of the invoice.
Payment by default
It is also possible to agree a default payment term. If the contract and invoice do not specify a payment deadline, payment is due within a maximum of 30 days of completion of the assignment or delivery of the goods.
Negotiated payment terms
Conversely, the parties may negotiate the payment terms they wish to apply to their business relationship. This must be specified in clauses included in the general terms and conditions of sale.
The payment term can be up to 60 days from the date of invoice. Alternatively, the period granted to the customer to pay the invoice may be 45 days after the end of the month, from the date the invoice is issued.
💡Note that these thresholds defined by law correspond to the maximum terms that can be applied. The parties are free to agree on shorter periods.
Payment terms for specific sectors
In addition to general payment terms, Article L441-11 of the French Commercial Code grants specific payment terms for certain sectors, as summarized below:
| Sector | Payment terms |
| Food | |
|
Perishable products (frozen meat and fish, ready-made meals, etc.) |
30 days after end of delivery period |
|
Live cattle and fresh meats for consumption |
20 days after delivery |
| Beverages | |
|
Alcohols subject to consumption duties (cognac, brandies, rum, etc.) |
30 days after end of delivery month |
|
Grapes and musts for wine and sparkling wine production |
45 days after end of month or 60 days from date of invoice |
| Transport | |
|
30 days from invoice date |
| Seasonal sector* | |
|
Winter sports goods, between suppliers and companies with seasonal activities |
30 additional days granted on top of 60 days/45 days end of month for deliveries before opening of season |
| Watches, jewelry and goldsmiths | 59 days before end of month, or 74 days net following invoice date |
| Leather industry | 54 days end of month from date of invoice |
| Agricultural equipment |
From date of invoice :
|
|
Toy trade |
Depending on period :
|
| VAT-free purchases of goods and services delivered outside the EU | 90 days from invoicing (must be mentioned on the sales contract). |
*A derogatory period may be agreed between the parties.
Finally, in the specific case of periodic invoices (also known as recapitulative invoices), the maximum period applicable is 45 days after issue.
What does the LME law say about payment times in 2021?
The LME law(Loi de Modernisation de l'Economie) came into force in 2009, with the aim of injecting greater dynamism into the French economy.
One of its measures was the capping of legal payment terms, to enable small businesses and the self-employed to pursue their activities without being restricted by excessively long payment periods.
Payment terms applicable in 2021 now follow the provisions of the Macron law, which defines a ceiling of 60 days from the invoice date, and also leaves the option of 45 days upon agreement between the parties.
Payment terms between professionals and private individuals
In a BtoC relationship, there is no legal obligation to set a payment term for an invoice. The parties are therefore free to set their own payment deadlines.
☝️Pour Invoices from self-employed entrepreneurs, like those from companies, are subject to variable payment terms depending on the activity or invoice amount. This information should be indicated on the invoice (for example: "payment due on", "due date", "payment date", etc.).
How to calculate payment terms Example
To avoid any disputes between the parties, it is advisable to specify the calculation method in advance, before invoicing.
For example, the notion of 45 days can be understood in 2 different ways:
- either 45 days are counted from the end of the month in which the invoice is issued: an invoice dated April 15 must therefore be paid before June 14;
- or 45 days from the date of issue of the invoice, with the possibility of payment up to the end of the month in which the invoice was issued: an invoice dated April 15 must then be paid by May 31.
Professionals therefore need to work together to determine the meaning of this term, so as to avoid any misunderstandings about the calculation of due dates.
Penalties for non-compliance with payment deadlines
For sellers
Professionals issuing invoices who fail to comply with the rules governing payment deadlines are liable to :
an administrative fine not exceeding €75,000 for an individual and €2 million for a legal entity.
Article L441-16 du Code de commerce
☝️ The general terms and conditions of sale must specify the terms of application and the interest rate for late payment penalties.
The penalty rate for late payment must also be specified in the sales contract. Professionals can decide on the rate to be applied, provided it is greater than or equal to three times the general interest rate (provided by the European Central Bank). This amount must appear on the invoice (all taxes included).
For buyers
If payment terms are not respected, the professionals concerned are liable to administrative sanctions, pronounced by the Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes. These penalties can amount to :
- up to €75,000 for an individual,
- and up to €375,000 for a legal entity.
Finally, a flat-rate indemnity for collection costs of €40 is payable by any professional who fails to pay an invoice on time. These fees are in addition to late payment penalties.
Managing payment terms with software
If you're a professional, you'd like to make it easier to manage your payment terms, and if possible, shorten them, so that you receive payment for your receivables more quickly. What if software could help you optimize your payment terms?
To help you manage your payments or receivables, depending on your needs, consider equipping yourself with tools such as :
- Invoicing software: offering simplified invoice payments for customers, with the option of paying directly online by the means of your choice (CB, SEPA, etc.) and an automatic reminder system;
- accounting software: to view the status of your receivables on a dashboard updated in real time, and take appropriate measures to reduce the risk of late payment;
- collection software : to speed up collection of your receivables and reduce financial risk.
Ultimately, whichever tool you choose, you'll be sure to keep abreast of the latest legislative developments, save time managing your administrative tasks, and ensure you maximize your cash flow!
Article translated from French