Debt manage\u00adment for small busi\u00adnesses: from con\u00adtract to enforcement<\/p>\n\n\n\n
Small busi\u00adnesses rare\u00adly have their own accounts depart\u00adment to keep track of out\u00adstan\u00adding items. The owner issues invoices in the evening and checks inco\u00adming pay\u00adments when he has time. If a pay\u00adment is over\u00addue, the\u00adre is often a long wait becau\u00adse they do not want to upset the cus\u00adto\u00admer. For a busi\u00adness with just a few lar\u00adge orders, even a sin\u00adgle unpaid invoice can tie up a who\u00adle month\u2019s cash flow.<\/p>\n\n\n\n
Debt manage\u00adment does not mean bom\u00adbar\u00adding cus\u00adto\u00admers with remin\u00adders. It is a struc\u00adtu\u00adred pro\u00adcess that beg\u00adins befo\u00adre the con\u00adtract is con\u00adcluded and ends with pay\u00adment, through the courts if neces\u00adsa\u00adry. We explain the rules gover\u00adning pay\u00adment terms, how a dun\u00adning pro\u00adcess works, when it is worth enga\u00adging a debt coll\u00adec\u00adtion agen\u00adcy or a soli\u00adci\u00adtor, what the pro\u00adcess is from a pay\u00adment order to enforce\u00adment, and the tax impli\u00adca\u00adti\u00adons of bad debts.<\/p>\n\n\n\n
The most effec\u00adti\u00adve mea\u00adsu\u00adres against non-pay\u00adment take effect befo\u00adre the ser\u00advice is pro\u00advi\u00added. It is almost impos\u00adsi\u00adble to imple\u00adment them at a later stage.<\/p>\n\n\n\n
In busi\u00adness dealings bet\u00adween com\u00adpa\u00adnies, pay\u00adment terms are free\u00adly nego\u00adtia\u00adble, but not wit\u00adhout limits. A pay\u00adment term excee\u00adding 60 days from receipt of the goods or ser\u00advices or receipt of the invoice is only valid if it has been express\u00adly agreed and is not gross\u00adly unfair to the cre\u00addi\u00adtor (Sec\u00adtion 271a(1) of the Ger\u00adman Civil Code (BGB)). If pay\u00adment is due only after an inspec\u00adtion or accep\u00adtance, a cor\u00adre\u00adspon\u00adding limit of 30 days appli\u00ades to the inspec\u00adtion or accep\u00adtance peri\u00adod (Sec\u00adtion 271a(3) of the Ger\u00adman Civil Code (BGB)). For public con\u00adtrac\u00adting aut\u00adho\u00adri\u00adties, the limits are stric\u00adter: terms excee\u00adding 30 days requi\u00adre objec\u00adti\u00adve jus\u00adti\u00adfi\u00adca\u00adti\u00adon, whilst tho\u00adse excee\u00adding 60 days are invalid.<\/p>\n\n\n\n
This is important for small sup\u00adpli\u00aders when deal\u00ading with lar\u00adge cus\u00adto\u00admers who seek to impo\u00adse long pay\u00adment terms. If the pay\u00adment term is spe\u00adci\u00adfied in the customer\u2019s terms and con\u00addi\u00adti\u00adons of purcha\u00adse, an even stric\u00adter limit appli\u00ades: in cases of doubt, a peri\u00adod excee\u00adding 30 days after receipt of the goods or ser\u00advices or receipt of the invoice is dee\u00admed unre\u00adason\u00adab\u00adly long and is the\u00adr\u00ade\u00adfo\u00adre inva\u00adlid (Sec\u00adtion 308(1a) of the Ger\u00adman Civil Code (BGB)). This also appli\u00ades to tran\u00adsac\u00adtions bet\u00adween busi\u00adnesses. An inva\u00adlid agree\u00adment on the pay\u00adment term does not inva\u00adli\u00adda\u00adte the rest of the con\u00adtract; in such cases, the sta\u00adtu\u00adto\u00adry rules app\u00adly. Sec\u00adtion 271a of the Ger\u00adman Civil Code (BGB) does not app\u00adly to con\u00adtracts with con\u00adsu\u00admers or to inst\u00adal\u00adment payments.<\/p>\n\n\n\n
Tho\u00adse who make advan\u00adce pay\u00adments over a peri\u00adod of weeks or months bear the grea\u00adtest risk. In the case of con\u00adtracts for work and ser\u00advices, the con\u00adtrac\u00adtor may demand inst\u00adal\u00adment pay\u00adments equi\u00adva\u00adlent to the value of the ser\u00advices ren\u00adde\u00adred (Sec\u00adtion 632a of the Ger\u00adman Civil Code (BGB)). For new cus\u00adto\u00admers, bespo\u00adke orders and lar\u00adger con\u00adtracts, an advan\u00adce pay\u00adment upon pla\u00adcing the order or a pay\u00adment sche\u00addu\u00adle based on con\u00ads\u00adtruc\u00adtion pha\u00adses is com\u00admon prac\u00adti\u00adce and enforceable, pro\u00advi\u00added it is spe\u00adci\u00adfied in the contract.<\/p>\n\n\n\n
If, after the con\u00adtract has been con\u00adcluded, it beco\u00admes appa\u00adrent that the cus\u00adto\u00admer is unli\u00adkely to be able to pay, no one is obli\u00adged to con\u00adti\u00adnue to sup\u00adp\u00adly goods or ser\u00advices in full know\u00adledge of the facts. The par\u00adty obli\u00adged to per\u00adform in advan\u00adce may with\u00adhold per\u00adfor\u00admance until the cus\u00adto\u00admer pays or pro\u00advi\u00addes secu\u00adri\u00adty (Sec\u00adtion 321 of the Ger\u00adman Civil Code (BGB)). They may set a reasonable dead\u00adline for this and, once this has expi\u00adred, with\u00addraw from the contract.<\/p>\n\n\n\n
Anyo\u00adne sup\u00adp\u00adly\u00ading goods should retain title to them until full pay\u00adment has been made (Sec\u00adtion 449 of the Ger\u00adman Civil Code (BGB)). Howe\u00adver, a simp\u00adle reten\u00adti\u00adon of title is only effec\u00adti\u00adve as long as the goods remain in the customer\u2019s pos\u00adses\u00adsi\u00adon in their ori\u00adgi\u00adnal sta\u00adte. If the cus\u00adto\u00admer resells them or pro\u00adces\u00adses them, the reten\u00adti\u00adon of title is gene\u00adral\u00adly lost. Pro\u00adtec\u00adtion against this is pro\u00advi\u00added by an exten\u00added reten\u00adti\u00adon of title, under which the cus\u00adto\u00admer assigns their cla\u00adim ari\u00adsing from the resa\u00adle in advan\u00adce, and a pro\u00adces\u00adsing clau\u00adse. Both must be express\u00adly agreed; in prac\u00adti\u00adce, this is usual\u00adly set out in the gene\u00adral terms and conditions.<\/p>\n\n\n\n
Important for enforce\u00adment: The sel\u00adler may only demand the return of the goods once they have with\u00addrawn from the con\u00adtract (Sec\u00adtion 449(2) of the Ger\u00adman Civil Code (BGB)).<\/p>\n\n\n\n
Terms of pay\u00adment, reten\u00adti\u00adon of title and rules on default are usual\u00adly set out in the gene\u00adral terms and con\u00addi\u00adti\u00adons. They are only valid if they are effec\u00adtively incor\u00adpo\u00adra\u00adted into the con\u00adtract. Prin\u00adting them on the back of the invoice is too late, as the con\u00adtract has alre\u00ada\u00addy been con\u00adcluded by then. If both par\u00adties refer to their own Gene\u00adral Terms and Con\u00addi\u00adti\u00adons, con\u00adflic\u00adting clau\u00adses are gene\u00adral\u00adly not valid. Accor\u00adding to case law, a simp\u00adle reten\u00adti\u00adon of title is usual\u00adly valid none\u00adthel\u00adess. An exten\u00added reten\u00adti\u00adon of title, on the other hand, often fails due to a defence clau\u00adse in the customer\u2019s terms and con\u00addi\u00adti\u00adons of purcha\u00adse. Anyo\u00adne working with major cus\u00adto\u00admers should the\u00adr\u00ade\u00adfo\u00adre be awa\u00adre of which terms actual\u00adly app\u00adly in the event of a dispute.<\/p>\n\n\n\n
In the case of new cus\u00adto\u00admers and lar\u00adger orders, it is worth taking a quick look at their sol\u00adven\u00adcy. The Com\u00admer\u00adcial Regis\u00adter and insol\u00adven\u00adcy noti\u00adces are publicly acces\u00adsi\u00adble. Anyo\u00adne who can demons\u00adtra\u00adte that they wish to avert finan\u00adcial los\u00adses cau\u00adsed by insol\u00advent con\u00adtrac\u00adtu\u00adal part\u00adners may access the deb\u00adtors\u2019 regis\u00adter main\u00adtai\u00adned by the enforce\u00adment courts (Sec\u00adtion 882f(1)(4) of the Code of Civil Pro\u00adce\u00addu\u00adre). In addi\u00adti\u00adon, the\u00adre are fee-based reports available from cre\u00addit refe\u00adrence agencies.<\/p>\n\n\n\n
If the cus\u00adto\u00admer is a natu\u00adral per\u00adson, such as a sole trader or a pri\u00adva\u00adte indi\u00advi\u00addu\u00adal, a cre\u00addit check con\u00adsti\u00adtu\u00adtes the pro\u00adces\u00adsing of per\u00adso\u00adnal data. It is per\u00admit\u00adted if the\u00adre is a legi\u00adti\u00adma\u00adte inte\u00adrest (Artic\u00adle 6(1)(f) of the GDPR). This is gene\u00adral\u00adly the case whe\u00adre the busi\u00adness pro\u00advi\u00addes goods or ser\u00advices in advan\u00adce and bears a genui\u00adne risk of non-pay\u00adment. The cus\u00adto\u00admer must be infor\u00admed of this (Artic\u00adles 13 and 14 of the GDPR), for exam\u00adp\u00adle in the pri\u00adva\u00adcy poli\u00adcy or in the quotation.<\/p>\n\n\n\n
A cla\u00adim can only be enforced as effec\u00adtively as it is docu\u00admen\u00adted. The invoice should descri\u00adbe the ser\u00advice in detail, refer to the order, deli\u00advery note or accep\u00adtance cer\u00adti\u00adfi\u00adca\u00adte, and spe\u00adci\u00adfy a clear due date.<\/p>\n\n\n\n
The invoice is decisi\u00adve in deter\u00admi\u00adning whe\u00adther pay\u00adment is in arre\u00adars. In com\u00admer\u00adcial tran\u00adsac\u00adtions, the cus\u00adto\u00admer is dee\u00admed to be in arre\u00adars no later than 30 days after the due date and receipt of the invoice, even wit\u00adhout a remin\u00adder (Sec\u00adtion 286(3) of the Ger\u00adman Civil Code (BGB)). In the case of con\u00adsu\u00admers, this only appli\u00ades if the invoice express\u00adly sta\u00adtes this con\u00adse\u00adquence. A sen\u00adtence such as \u201eIf you do not pay within 30 days of the due date and receipt of this invoice, you will be in default\u201c should the\u00adr\u00ade\u00adfo\u00adre appear on every invoice issued to pri\u00adva\u00adte customers.<\/p>\n\n\n\n
Accor\u00adding to case law, a pay\u00adment date that the trader uni\u00adla\u00adte\u00adral\u00adly enters on the invoice does not, in its\u00adelf, trig\u00adger default wit\u00adhout a remin\u00adder. For this to hap\u00adpen, the dead\u00adline must be agreed in the con\u00adtract. Anyo\u00adne wis\u00adhing to cla\u00adim inte\u00adrest on late pay\u00adments befo\u00adre 30 days have elap\u00adsed must issue a sin\u00adgle, expli\u00adcit remin\u00adder once the pay\u00adment dead\u00adline has passed.<\/p>\n\n\n\n
From 2027, many busi\u00adnesses will also be requi\u00adred to use e\u2011invoicing. Read more about this in our artic\u00adle on E\u2011invoicing from 2027<\/a>.<\/p>\n\n\n\n In legal terms, a sin\u00adgle remin\u00adder is suf\u00adfi\u00adci\u00adent to place the deb\u00adtor in default (Sec\u00adtion 286(1) of the Ger\u00adman Civil Code (BGB)). The wide\u00adspread belief that three remin\u00adders are requi\u00adred befo\u00adre a pay\u00adment order can be issued is incor\u00adrect. A struc\u00adtu\u00adred remin\u00adder sys\u00adtem is the\u00adr\u00ade\u00adfo\u00adre not about ful\u00adfil\u00adling for\u00adma\u00adli\u00adties, but about relia\u00adbi\u00adli\u00adty: every out\u00adstan\u00adding invoice is trea\u00adted in the same way at the same time, regard\u00adless of how busy the busi\u00adness is at the moment.<\/p>\n\n\n\n A tried-and-tes\u00adted pro\u00adcess for small businesses:<\/p>\n\n\n\n It is important that one per\u00adson within the orga\u00adni\u00adsa\u00adti\u00adon is respon\u00adsi\u00adble for fol\u00adlo\u00adwing up on mat\u00adters and that the steps announ\u00adced are actual\u00adly car\u00adri\u00aded out. If a threa\u00adten\u00aded con\u00adse\u00adquence is not fol\u00adlo\u00adwed through, it only pro\u00adlongs the wai\u00adting time.<\/p>\n\n\n\n Once a debt falls into arre\u00adars, a cla\u00adim for inte\u00adrest on arre\u00adars ari\u00adses: five per\u00adcen\u00adta\u00adge points abo\u00adve the base rate for con\u00adsu\u00admers, and nine per\u00adcen\u00adta\u00adge points abo\u00adve the base rate for other deb\u00adtors. If the deb\u00adtor is not a con\u00adsu\u00admer, a flat-rate char\u00adge of 40 euros per cla\u00adim is added (Sec\u00adtion 288 of the Ger\u00adman Civil Code (BGB)). We explain the value of the\u00adse claims and why a remin\u00adder does not inter\u00adrupt the limi\u00adta\u00adti\u00adon peri\u00adod in our artic\u00adle Limi\u00adta\u00adti\u00adon peri\u00adod at the end of the year<\/a>.<\/p>\n\n\n\n If a regu\u00adlar cus\u00adto\u00admer fails to pay, the ques\u00adti\u00adon ari\u00adses as to whe\u00adther fur\u00adther orders should still be ful\u00adfil\u00adled. In the case of par\u00adti\u00adal deli\u00adveries under the same con\u00adtract, the trader may with\u00adhold fur\u00adther deli\u00adveries as long as ear\u00adlier invoices due remain unpaid (Sec\u00adtion 320 of the Ger\u00adman Civil Code (BGB)). If the trader is obli\u00adged to per\u00adform first, the defence of uncer\u00adtain\u00adty (Sec\u00adtion 321 BGB) may, under cer\u00adtain cir\u00adcum\u00ads\u00adtances, be of assis\u00adtance. In the case of various orders ari\u00adsing from an ongo\u00ading busi\u00adness rela\u00adti\u00adonship, a right of reten\u00adti\u00adon under Sec\u00adtion 273 of the Ger\u00adman Civil Code (BGB) may app\u00adly; bet\u00adween trad\u00aders, this may also app\u00adly under Sec\u00adtion 369 of the Ger\u00adman Com\u00admer\u00adcial Code (HGB). Frame\u00adwork agree\u00adments with fixed deli\u00advery obli\u00adga\u00adti\u00adons may rest\u00adrict this. A sus\u00adpen\u00adsi\u00adon of deli\u00adveries should the\u00adr\u00ade\u00adfo\u00adre be asses\u00adsed in advan\u00adce and noti\u00adfied to the cus\u00adto\u00admer in writing.<\/p>\n\n\n\n If pay\u00adment is still not made despi\u00adte a remin\u00adder, small busi\u00adnesses are often faced with the choice bet\u00adween a debt coll\u00adec\u00adtion agen\u00adcy and a law firm. Both are aut\u00adho\u00adri\u00adsed to reco\u00adver debts out of court. The dif\u00adfe\u00adren\u00adces lie in the cos\u00adts and in what hap\u00adpens if the deb\u00adtor con\u00adtests the claim.<\/p>\n\n\n\n Cos\u00adts:<\/strong> Reco\u00advera\u00adble debt coll\u00adec\u00adtion cos\u00adts are limi\u00adt\u00aded to the lawyer\u2019s fees. The cre\u00addi\u00adtor may cla\u00adim from the deb\u00adtor no more than the amount a lawy\u00ader would be entit\u00adled to char\u00adge for the same work (Sec\u00adtion 13e of the Ger\u00adman Regu\u00adla\u00adti\u00adon of Lawy\u00aders\u2019 Fees Act (RDG)). Sin\u00adce Octo\u00adber 2021, lower fee rates have also appli\u00aded to undis\u00adpu\u00adted claims: as a rule, the fee is cap\u00adped at 0.9; in straight\u00adfor\u00adward cases, it is cap\u00adped at 0.5. A case is gene\u00adral\u00adly con\u00adside\u00adred straight\u00adfor\u00adward if the deb\u00adtor pays within two weeks of the first demand for pay\u00adment (No. 2300 VV RVG). Anyo\u00adne who first ins\u00adtructs a debt coll\u00adec\u00adtion agen\u00adcy and then a soli\u00adci\u00adtor will, as a gene\u00adral rule, not be reim\u00adbur\u00adsed for the dou\u00adble cos\u00adts (Sec\u00adtion 13f RDG). If the deb\u00adtor fails to pay at all, the cre\u00addi\u00adtor bears the cost risk, unless they have agreed on a suc\u00adcess-based fee.<\/p>\n\n\n\n Legal repre\u00adsen\u00adta\u00adti\u00adon in court:<\/strong> Debt coll\u00adec\u00adtion agen\u00adci\u00ades are aut\u00adho\u00adri\u00adsed to initia\u00adte the court dun\u00adning pro\u00adce\u00addu\u00adre and to enforce jud\u00adge\u00adment against mova\u00adble assets. Howe\u00adver, if the deb\u00adtor lodges an objec\u00adtion and the mat\u00adter is refer\u00adred to the court of first ins\u00adtance, their power of repre\u00adsen\u00adta\u00adti\u00adon cea\u00adses (Sec\u00adtion 79(2)(4) of the Code of Civil Pro\u00adce\u00addu\u00adre). In such cases, only a soli\u00adci\u00adtor may act as legal repre\u00adsen\u00adta\u00adti\u00adve, and that soli\u00adci\u00adtor must fami\u00adlia\u00adri\u00adse them\u00adsel\u00adves with the case from the out\u00adset. In prin\u00adci\u00adple, the cre\u00addi\u00adtor may also con\u00adduct the pro\u00adcee\u00addings them\u00adsel\u00adves befo\u00adre the local court.<\/p>\n\n\n\n For claims whe\u00adre objec\u00adtions from the cus\u00adto\u00admer are to be expec\u00adted \u2013 for exam\u00adp\u00adle, due to alle\u00adged defects \u2013 cont\u00adac\u00adting the soli\u00adci\u00adtors\u2019 prac\u00adti\u00adce direct\u00adly is the\u00adr\u00ade\u00adfo\u00adre usual\u00adly the qui\u00adckest rou\u00adte. Fur\u00adther\u00admo\u00adre, a for\u00admal demand for pay\u00adment from a soli\u00adci\u00adtor, set\u00adting a dead\u00adline, is often more effec\u00adti\u00adve than any fur\u00adther remin\u00adders sent by the clai\u00admant themselves.<\/p>\n\n\n\n If the deb\u00adtor fails to pay even after the final remin\u00adder, the mat\u00adter must be taken to court. If the cla\u00adim is undis\u00adpu\u00adted, the court-based debt coll\u00adec\u00adtion pro\u00adce\u00addu\u00adre is quicker and che\u00ada\u00adper than brin\u00adging a cla\u00adim. For appli\u00adcants from Schles\u00adwig-Hol\u00adstein, the Schles\u00adwig Local Court is the cen\u00adtral court respon\u00adsi\u00adble for debt coll\u00adec\u00adtion proceedings.<\/p>\n\n\n\n If the deb\u00adtor lodges an objec\u00adtion, the pro\u00adcee\u00addings are con\u00adver\u00adted into stan\u00addard legal pro\u00adcee\u00addings at the creditor\u2019s request. To do so, the cre\u00addi\u00adtor must pay the addi\u00adtio\u00adnal court fees and sub\u00adstan\u00adtia\u00adte their cla\u00adim. Fol\u00adlo\u00adwing an objec\u00adtion to the enforce\u00adment order, the court refers the mat\u00adter ex offi\u00adcio. Sin\u00adce 1 Janu\u00adary 2026, local courts have had juris\u00addic\u00adtion over claims up to 10,000 euros. If the cus\u00adto\u00admer has alre\u00ada\u00addy dis\u00adpu\u00adted the cla\u00adim, brin\u00adging a legal action is often the bet\u00adter cour\u00adse of action from the out\u00adset, as an objec\u00adtion is to be expec\u00adted in any case.<\/p>\n\n\n\n A court order alo\u00adne does not gene\u00adra\u00adte any money. If the deb\u00adtor still fails to pay, various enforce\u00adment mea\u00adsu\u00adres are available. Which one is appro\u00adpria\u00adte depends on what is known about the debtor\u2019s assets.<\/p>\n\n\n\n If a cus\u00adto\u00admer offers to pay in inst\u00adal\u00adments, this is often the qui\u00adckest solu\u00adti\u00adon, pro\u00advi\u00added the agree\u00adment is cle\u00adar\u00adly worded. It should sta\u00adte in wri\u00adting that the deb\u00adtor ack\u00adnow\u00adled\u00adges the total cla\u00adim, inclu\u00adding inte\u00adrest and cos\u00adts. This ack\u00adnow\u00adled\u00adge\u00adment resets the limi\u00adta\u00adti\u00adon peri\u00adod (Sec\u00adtion 212 of the Ger\u00adman Civil Code (BGB)). If it is for\u00admu\u00adla\u00adted as an express ack\u00adnow\u00adled\u00adge\u00adment of debt, it also gene\u00adral\u00adly pre\u00adcludes the deb\u00adtor from rai\u00adsing any objec\u00adtions to the cla\u00adim of which they are awa\u00adre. This includes fixed inst\u00adal\u00adments with spe\u00adci\u00adfic dates and a fall-back clau\u00adse: if the deb\u00adtor falls behind with an inst\u00adal\u00adment, the enti\u00adre out\u00adstan\u00adding amount beco\u00admes due imme\u00addia\u00adte\u00adly. If enforce\u00adment pro\u00adcee\u00addings are alre\u00ada\u00addy under\u00adway, the bai\u00adliff may also allow the deb\u00adtor to pay by inst\u00adal\u00adments, pro\u00advi\u00added the cre\u00addi\u00adtor has not ruled this out (Sec\u00adtion 802b of the Code of Civil Pro\u00adce\u00addu\u00adre (ZPO)). Enforce\u00adment is then sus\u00adpen\u00added. The cre\u00addi\u00adtor may object to the pay\u00adment plan wit\u00adhout delay. If the deb\u00adtor falls more than two weeks behind with an inst\u00adal\u00adment, the plan beco\u00admes void.<\/p>\n\n\n\n One point is often over\u00adloo\u00adked: if the deb\u00adtor sub\u00adse\u00adquent\u00adly beco\u00admes insol\u00advent, the insol\u00adven\u00adcy admi\u00adnis\u00adtra\u00adtor may, under cer\u00adtain cir\u00adcum\u00ads\u00adtances, recla\u00adim any pay\u00adments recei\u00adved. In the case of pay\u00adments to which the cre\u00addi\u00adtor was entit\u00adled, it depends on whe\u00adther the cre\u00addi\u00adtor was awa\u00adre of the debtor\u2019s insol\u00adven\u00adcy (sec\u00adtion 133(1) and (3) of the Insol\u00adven\u00adcy Code (InsO)). If the cre\u00addi\u00adtor has agreed to pay\u00adment by inst\u00adal\u00adments, it has been pre\u00adsu\u00admed sin\u00adce 2017 that they were not awa\u00adre of the debtor\u2019s insol\u00adven\u00adcy (sec\u00adtion 133(3), second sen\u00adtence, of the Insol\u00adven\u00adcy Code). Howe\u00adver, this pre\u00adsump\u00adti\u00adon may be rebut\u00adted by other cir\u00adcum\u00ads\u00adtances, for exam\u00adp\u00adle if the deb\u00adtor open\u00adly decla\u00adres that they are no lon\u00adger able to meet their cre\u00addi\u00adtors\u2019 claims in full. Such wor\u00adding should not be included in an inst\u00adal\u00adment pay\u00adment agreement.<\/p>\n\n\n\n Debt manage\u00adment is not just a mat\u00adter of liqui\u00addi\u00adty. Out\u00adstan\u00adding and writ\u00adten-off debts have an impact on VAT, the balan\u00adce sheet and profit.<\/p>\n\n\n\n Anyo\u00adne who accounts for VAT on their tur\u00adno\u00adver based on agreed fees is lia\u00adble for VAT as ear\u00adly as the advan\u00adce return peri\u00adod in which the ser\u00advice was pro\u00advi\u00added (Sec\u00adtion 13(1)(1)(a) of the Ger\u00adman VAT Act), regard\u00adless of whe\u00adther and when the cus\u00adto\u00admer pays. For small busi\u00adnesses, this means having to pre-finan\u00adce the tax out of their own pockets. Busi\u00adnesses with a total tur\u00adno\u00adver of no more than 800,000 euros in the pre\u00advious year and self-employ\u00aded indi\u00advi\u00addu\u00adals may app\u00adly to the tax office for taxa\u00adti\u00adon on an actu\u00adal basis (Sec\u00adtion 20 of the Ger\u00adman Value Added Tax Act). In this case, VAT is only paya\u00adble upon receipt of payment.<\/p>\n\n\n\n If a cla\u00adim beco\u00admes uncoll\u00adec\u00adti\u00adble under the \u2018debit taxa\u00adti\u00adon\u2019 sche\u00adme, the VAT must be adjus\u00adted for the peri\u00adod in which the cla\u00adim beco\u00admes uncoll\u00adec\u00adti\u00adble (Sec\u00adtion 17(2)(1) of the VAT Act). A receiva\u00adble is dee\u00admed irre\u00adco\u00advera\u00adble not only upon defi\u00adni\u00adti\u00adve loss, but also as soon as it can\u00adnot be enforced for the fore\u00adseeable future. For fur\u00adther details, see our artic\u00adle on Limi\u00adta\u00adti\u00adon peri\u00adod at the end of the year<\/a>.<\/p>\n\n\n\n Inte\u00adrest on late pay\u00adments con\u00adsti\u00adtu\u00adtes com\u00adpen\u00adsa\u00adti\u00adon for loss and is not sub\u00adject to VAT. No VAT is the\u00adr\u00ade\u00adfo\u00adre char\u00adged on the inte\u00adrest. It is cal\u00adcu\u00adla\u00adted on the basis of the full invoice amount.<\/p>\n\n\n\n Com\u00adpa\u00adnies pre\u00adpa\u00adring finan\u00adcial state\u00adments must wri\u00adte down doubtful debts as at the balan\u00adce sheet date. For indi\u00advi\u00addu\u00adal at-risk debts, this is done by means of a spe\u00adci\u00adfic pro\u00advi\u00adsi\u00adon; for the gene\u00adral risk of default on the remai\u00adning debt port\u00adfo\u00adlio, a gene\u00adral pro\u00advi\u00adsi\u00adon is appli\u00aded. In each case, the net amount exclu\u00adding VAT is writ\u00adten down. For tax pur\u00adpo\u00adses, a wri\u00adte-down to the lower reco\u00advera\u00adble amount is only per\u00admit\u00adted in the case of an impair\u00adment that is expec\u00adted to be per\u00adma\u00adnent (Sec\u00adtion 6(1)(2) of the Inco\u00adme Tax Act). The tax aut\u00adho\u00adri\u00adties expect veri\u00adfia\u00adble reasons for this, such as his\u00adto\u00adri\u00adcal data from pre\u00advious defaults or the sta\u00adtus of dun\u00adning and enforce\u00adment pro\u00adcee\u00addings. A docu\u00admen\u00adted dun\u00adning pro\u00adcess the\u00adr\u00ade\u00adfo\u00adre also assists with the pre\u00adpa\u00adra\u00adti\u00adon of the annu\u00adal accounts.<\/p>\n\n\n\n Under the cash-basis accoun\u00adting method, a non-pay\u00adment does not affect the pro\u00adfit becau\u00adse the out\u00adstan\u00adding pay\u00adment was never recor\u00added as inco\u00adme. Court and legal fees incur\u00adred in enfor\u00adcing trade receiv\u00ada\u00adbles are ope\u00adra\u00adting expen\u00adses in both cases. If the deb\u00adtor reim\u00adbur\u00adses them at a later date, they con\u00adsti\u00adtu\u00adte busi\u00adness income.<\/p>\n\n\n\n In fac\u00adto\u00adring, the com\u00adpa\u00adny sells its receiv\u00ada\u00adbles to a fac\u00adtor and recei\u00adves the majo\u00adri\u00adty of the amount imme\u00addia\u00adte\u00adly. In true fac\u00adto\u00adring, the fac\u00adtor assu\u00admes the cre\u00addit risk, and the receiv\u00ada\u00adbles are remo\u00adved from the company\u2019s balan\u00adce sheet. In non-true fac\u00adto\u00adring, the cre\u00addit risk remains with the com\u00adpa\u00adny; in eco\u00adno\u00admic terms, it amounts to a loan.<\/p>\n\n\n\n Fac\u00adto\u00adring impro\u00adves cash flow, but incurs fees and inte\u00adrest. For the pur\u00adpo\u00adses of trade tax, one quar\u00adter of the inte\u00adrest or dis\u00adcount com\u00adpo\u00adnent of the fac\u00adto\u00adring cos\u00adts is added to the taxa\u00adble amount (Sec\u00adtion 8(1)(a) of the Trade Tax Act). Howe\u00adver, this only appli\u00ades if the total of all finan\u00adcing com\u00adpon\u00adents exceeds 200,000 euros. This also includes inte\u00adrest on loans and pro rata rents, ten\u00adan\u00adci\u00ades, lea\u00adse pay\u00adments and licence fees. For small busi\u00adnesses, the\u00adr\u00ade\u00adfo\u00adre, this addi\u00adti\u00adon is rare\u00adly a fac\u00adtor. Whe\u00adther fac\u00adto\u00adring is wort\u00adhwhile depends on the volu\u00adme of receiv\u00ada\u00adbles, the cus\u00adto\u00admer struc\u00adtu\u00adre and the terms and conditions.<\/p>\n\n\n\n When it comes to out\u00adstan\u00adding receiv\u00ada\u00adbles, legal and tax issues are intert\u00adwi\u00adned. Civil law deter\u00admi\u00adnes whe\u00adther a cla\u00adim is enforceable. Tax law deter\u00admi\u00adnes when VAT can be adjus\u00adted and the receiva\u00adble writ\u00adten off. In many busi\u00adnesses, the\u00adse two mat\u00adters are hand\u00adled by dif\u00adfe\u00adrent advisers.<\/p>\n\n\n\n Ina Ree\u00adse is a soli\u00adci\u00adtor, a spe\u00adcia\u00adlist in tax law and a tax advi\u00adser. In our Cre\u00addit manage\u00adment<\/a> We hand\u00adle the enti\u00adre enforce\u00adment pro\u00adcess, from the lawyer\u2019s demand for pay\u00adment through the dun\u00adning pro\u00adce\u00addu\u00adre right through to enforce\u00adment pro\u00adcee\u00addings. We draft pay\u00adment terms, gene\u00adral terms and con\u00addi\u00adti\u00adons and reten\u00adti\u00adon of title clau\u00adses in the Com\u00admer\u00adcial and Com\u00adpa\u00adny Law<\/a> and in the gene\u00adral civil law<\/a>. We explain the tax tre\u00adat\u00adment of bad debts, taxa\u00adti\u00adon on an actu\u00adal basis and value adjus\u00adt\u00adments in our Tax advice<\/a>.<\/p>\n\n\n\n The\u00adre is no spe\u00adci\u00adfic num\u00adber. A sin\u00adgle remin\u00adder is suf\u00adfi\u00adci\u00adent to put the deb\u00adtor in default. In com\u00admer\u00adcial tran\u00adsac\u00adtions, default occurs no later than 30 days after the due date and receipt of the invoice, even wit\u00adhout a remin\u00adder. An appli\u00adca\u00adti\u00adon for a pay\u00adment order can also be made wit\u00adhout a pri\u00ador remin\u00adder. Howe\u00adver, if the deb\u00adtor was not yet in default at that point, the\u00adre may be a dis\u00adpu\u00adte over who bears the cos\u00adts. It is the\u00adr\u00ade\u00adfo\u00adre advi\u00adsa\u00adble to send a remin\u00adder in advance.<\/p>\n\n\n\n The\u00adre is no mini\u00admum cla\u00adim amount. The court fee is at least 38 euros and is based on the amount of the cla\u00adim. If the cla\u00adim is valid, the deb\u00adtor must bear the cos\u00adts of the pro\u00adcee\u00addings. The key ques\u00adti\u00adon is rather whe\u00adther the\u00adre are any assets available from the deb\u00adtor. In the case of deb\u00adtors with no assets, the cre\u00addi\u00adtor is left to bear the cos\u00adts, but holds a jud\u00adge\u00adment which they can enforce for 30 years, for exam\u00adp\u00adle if the debtor\u2019s finan\u00adcial cir\u00adcum\u00ads\u00adtances impro\u00adve at a later date.<\/p>\n\n\n\n If the deb\u00adtor is alre\u00ada\u00addy in default, they must reim\u00adbur\u00adse the cos\u00adts of legal pro\u00adcee\u00addings as dama\u00adges for default. This appli\u00ades to a for\u00admal demand for pay\u00adment issued by a soli\u00adci\u00adtor as well as to court pro\u00adcee\u00addings. The flat-rate late pay\u00adment char\u00adge of 40 euros is set off against this. If the deb\u00adtor does not pay becau\u00adse they have no means to do so, the cre\u00addi\u00adtor initi\u00adal\u00adly bears the cos\u00adts them\u00adsel\u00adves. For busi\u00adness claims, the\u00adse are trea\u00adted as busi\u00adness expenses.<\/p>\n\n\n\n Often, yes. In the case of par\u00adti\u00adal deli\u00adveries under the same con\u00adtract, the con\u00adtrac\u00adtor may with\u00adhold fur\u00adther deli\u00adveries as long as pre\u00advious invoices due remain unpaid. A right of reten\u00adti\u00adon may app\u00adly in the case of various orders ari\u00adsing from an ongo\u00ading busi\u00adness rela\u00adti\u00adonship. Frame\u00adwork agree\u00adments may rest\u00adrict this. Any sus\u00adpen\u00adsi\u00adon of deli\u00adveries should be asses\u00adsed in advan\u00adce and noti\u00adfied in writing.<\/p>\n\n\n\n Do you have any out\u00adstan\u00adding debts, or would you like to have your pay\u00adment terms review\u00aded?<\/strong> During an initi\u00adal con\u00adsul\u00adta\u00adti\u00adon las\u00adting around 15 minu\u00adtes, we\u2019ll assess whe\u00adre you\u2019re at and what steps would be best to take. Get in touch now<\/a><\/p>\n\n\n\n Many cases of non-pay\u00adment can be avo\u00adided befo\u00adre the invoice is even issued. We explain how small busi\u00adnesses can safe\u00adguard their receiv\u00ada\u00adbles, set up a struc\u00adtu\u00adred dun\u00adning pro\u00adcess and enforce pay\u00adment of out\u00adstan\u00adding invoices right through to enforce\u00adment pro\u00adcee\u00addings, as well as the rele\u00advant tax implications.<\/p>","protected":false},"author":1,"featured_media":1577,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"wp_typography_post_enhancements_disabled":false,"footnotes":""},"categories":[14],"tags":[398,393,277,275,276,394,395,274,279,396,397,280,278],"class_list":["post-1576","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-allgemeines","tag-binden-liquiditaet","tag-festes-mahnwesen","tag-inkasso-oder-anwalt","tag-mahnbescheid-vollstreckungsbescheid","tag-mahnwesen","tag-offene-rechnungen","tag-offene-rechnungen-binden","tag-offene-rechnungen-eintreiben","tag-ratenzahlungsvereinbarung","tag-rechnungen-binden","tag-rechnungen-binden-liquiditaet","tag-zahlungsausfall-vermeiden","tag-zahlungsziel-b2b"],"_links":{"self":[{"href":"https:\/\/kanzlei-reese.de\/en\/wp-json\/wp\/v2\/posts\/1576","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/kanzlei-reese.de\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/kanzlei-reese.de\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/kanzlei-reese.de\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/kanzlei-reese.de\/en\/wp-json\/wp\/v2\/comments?post=1576"}],"version-history":[{"count":1,"href":"https:\/\/kanzlei-reese.de\/en\/wp-json\/wp\/v2\/posts\/1576\/revisions"}],"predecessor-version":[{"id":1578,"href":"https:\/\/kanzlei-reese.de\/en\/wp-json\/wp\/v2\/posts\/1576\/revisions\/1578"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/kanzlei-reese.de\/en\/wp-json\/wp\/v2\/media\/1577"}],"wp:attachment":[{"href":"https:\/\/kanzlei-reese.de\/en\/wp-json\/wp\/v2\/media?parent=1576"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/kanzlei-reese.de\/en\/wp-json\/wp\/v2\/categories?post=1576"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/kanzlei-reese.de\/en\/wp-json\/wp\/v2\/tags?post=1576"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}A robust debt collection system<\/h2>\n\n\n\n
\n
Suspension of deliveries in existing business relationships<\/h3>\n\n\n\n
Debt collection agency or solicitor?<\/h2>\n\n\n\n
From the order for payment to enforcement<\/h2>\n\n\n\n
The procedure for the order for payment<\/h3>\n\n\n\n
\n
Enforcement proceedings<\/h3>\n\n\n\n
\n
How to agree on an instalment plan correctly<\/h2>\n\n\n\n
Tax considerations<\/h2>\n\n\n\n
Value Added Tax: Checking the actual tax liability<\/h3>\n\n\n\n
Balance sheet and income statement<\/h3>\n\n\n\n
Factoring as an alternative<\/h3>\n\n\n\n
Checklist: Receivables management in seven steps<\/h2>\n\n\n\n
\n
Legal and tax services under one roof<\/h2>\n\n\n\n
Frequently asked questions about receivables management<\/h2>\n\n\n\n
How many reminders do I have to send before a payment order is issued?<\/h3>\n\n\n\n
At what amount is it worth applying for a payment order?<\/h3>\n\n\n\n
Who pays the legal fees?<\/h3>\n\n\n\n
Am I allowed to stop further deliveries if a customer fails to pay?<\/h3>\n\n\n\n
In summary<\/h2>\n\n\n\n
\n
Sources<\/h3>\n\n\n\n
\n