What are the invoice payment deadlines?
What do you need to know about payment periods, those little lines that appear in general terms and conditions of sale (GTCS), contracts and invoices?
Payment periods are set by current legislation, which imposes the maximum length of time that any company may set as part of its commercial relations, unless otherwise stated or a specific agreement has been reached.
What are the different types of payment terms ? How should they be applied and calculated? What financial or administrative penalties are likely to apply if the deadline is not met?
Take a closer look at the specifics, so that you can understand and apply them with full knowledge of the facts!
What payment terms apply to businesses?
In accordance with the French Commercial Code, the default payment period applicable between business partners (BtoB) is 30 days following completion of the service or sale of a product.
The period runs from the date of issue of the invoice, which is one of the compulsory items of information it must contain.
Payment terms can be negotiated between companies. More specifically, here are the types of payment terms applicable between companies (source: service-public.fr):
Cash payment
A company may choose to apply a cash payment in the context of an inter-business relationship. This means that the sum owed to the seller must be paid by the customer immediately and in one instalment, i.e. on the day the goods or services are delivered.
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 buyer 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 payment method with a default due date. If there is no mention of a payment deadline in the contract or invoice, payment is due within a maximum of 30 days of completion of an assignment or delivery of a good.
Payment by agreed deadline
Conversely, the parties may negotiate the payment period they wish to apply to their commercial relationship. To do this, clauses in the general terms and conditions of sale must specify this.
The payment term can be up to 60 days from the date of issue of the 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.
💡 It should be noted that these thresholds defined by law correspond to the maximum periods that can be applied. The parties are free to agree to shorter periods.
Payment terms for specific sectors
In addition to the general payment terms, article L441-11 of the French Commercial Code grants specific payment terms for certain sectors, as summarised below:
| Sector | Payment terms |
| Food | |
|
Perishable products (frozen meat and fish, ready meals, etc.) |
30 days after the end of the ten-day delivery period |
|
Live cattle and fresh meat for consumption |
20 days after delivery |
| Beverages | |
|
Alcohols subject to consumption duties (cognac, brandies, rum, etc.) |
30 days after the end of the month of delivery |
|
Grapes and musts for the manufacture of wine and sparkling wine |
45 days after the end of the month or 60 days after invoicing |
| Transport | |
|
30 days from invoice date |
| Seasonal sector* | |
|
Winter sports goods, between suppliers and companies whose activity is seasonal |
30 additional days granted on top of the 60 days/45 days end of month for deliveries before the start of the season |
| Watches, jewellery and goldsmiths | 59 days before the end of the month, or 74 days net following the invoice date |
| Leather industry | 54 days end of month from date of invoice |
| Agricultural equipment |
From date of invoice :
|
|
Toy trade |
Depending on the period :
|
| VAT-free purchases of goods and services delivered outside the EU | 90 days from invoicing (must be stated on the sales contract) |
*A derogatory period may be agreed between the parties.
Finally, in the specific case of periodic invoices (also known as summary invoices), the maximum period applicable is 45 days after they are issued.
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 to cap statutory payment periods, to enable small businesses and the self-employed to pursue their activities without being restricted by excessively long payment periods.
The payment periods applicable in 2021 now follow the provisions of the Macron law, which defines a ceiling of 60 days from the date of invoicing, and also leaves the option of 45 days by agreement between the parties.
Payment terms between professionals and private individuals
In a B2C relationship, there is no legal obligation to set a payment period for an invoice. The parties are therefore free to set the payment deadline.
☝️Pour Invoices from self-employed entrepreneurs, like those from companies, vary in terms of payment terms, depending on the activity or the amount of the invoice. This should be stated on the invoice (for example: "payment due on", "due date", "payment date", etc.).
How do you calculate payment terms? Example
To avoid any disputes between the parties, it is advisable to specify the method of calculation in advance, before the invoicing stage.
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 15 April should therefore be paid before 14 June;
- or 45 days are counted from the date of issue of the invoice, with the possibility of paying the invoice up to the end of the month in which the deadline falls: an invoice dated 15 April must then be paid before 31 May.
Professionals therefore need to work together to determine the meaning of the term, so that there is no misunderstanding about the calculation of due dates.
Penalties for failing to meet payment deadlines
For sellers
Professionals issuing invoices who fail to comply with the rules relating to payment deadlines are liable to :
an administrative fine of up to €75,000 for a natural person and up to €2 million for a legal entity.
Article L441-16 du Code de commerce
☝️ The general terms and conditions of sale must specify how late payment penalties are to be applied and the interest rate .
The penalty rate for failure to meet the deadline must also appear on the sales contract. Traders can decide on the rate to be applied, provided that 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 (including VAT).
For buyers
If payment terms are not respected, the professionals concerned are liable to administrative penalties, imposed by the Direction générale de la concurrence, de la consommation et de la répression des fraudes (Directorate-General for Competition, Consumer Affairs and Fraud Control). These penalties can amount to :
- up to €75,000 for an individual,
- and up to €375,000 for a legal entity.
Lastly, a flat-rate recovery fee of €40 is payable by any professional who fails to pay an invoice on time. These costs are in addition to the late payment penalties.
Managing payment deadlines with software
You are a professional and you want 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 optimise your payment times?
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 using the method of your choice (credit card, 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 the recovery of your trade receivables and reduce the financial risk.
In the end, whichever tool you choose, you'll be sure to keep up to date with the latest legislative developments, save time managing your administrative tasks and maximise your cash flow!
Article translated from French