What to do in case of late payment? Rights as a company

What does late payment mean in accordance with BGB?

Payment arrears occur when a customer, also known as a debtor, fails to pay an invoice within the agreed period. The Civil Code (Section 286 BGB) regulates exactly what this means and when it applies. It is important: As soon as there is a delay in payment, you as a creditor have the right to charge default interest and reminder fees.

Payment delay: Requirements and rights

Payment is delayed in accordance with BGB if the following conditions are met:

• Payment due date: The claim must be legally and actually due. This means that the service or delivery has been provided and payment is due in accordance with the contractual arrangements.
• Receipt of the invoice: Your customer must have received the invoice. This is the case, for example, if you have sent the invoice by email or post and it has demonstrably arrived.
• Expiry of the deadline: If your customer has not paid after the deadline, payment is automatically delayed. By default, the 30-day rule applies here.

What does the 30-day rule mean?

If you have not agreed on a specific payment term, the legal provision applies: A debtor is in default 30 days after receipt of the invoice. Important: For consumers, you must explicitly state this rule on the invoice, for example: “Please note that you will be in default of payment no later than 30 days after receipt of this invoice. ”

Individual payment terms

You can shorten the 30-day rule with a clear payment term. Set deadlines such as “payable within 14 days” or “due date: [date]” in your contracts or on the invoice. This gives you more planning security and allows you to react more quickly.

The role of reminders in case of late payment

Whether you have to send a reminder depends on whether a fixed payment term has been agreed or not.

• With a fixed payment term:
  If your invoice includes a clear payment term, such as an exact due date, no reminder is required. The customer is automatically in default as soon as the deadline has expired.
• Without a fixed payment term:
  If you have not specified a specific payment term on your invoice, the delay only occurs after a reminder. This reminder formally defaults on the customer and gives him a new deadline to settle the outstanding claim.

In practice, it is often worthwhile to start with a friendly payment reminder. Many customers pay immediately after the initial reminder — without the need for further steps. Only when it receives no attention should you send a formal reminder.

The Act against Delay in Payment

Late payments are not only an annoying problem, but also a financial risk — and by no means only at national level. With the EU Late Payment Directive (Directive 2011/7/EU) clear rules created to protect creditors like you and improve payment practices. Especially in the B2B sector, these standards set important limits so that outstanding invoices do not become a permanent burden:

• Maximum payment period of 30 days: Companies are generally not allowed to agree on payment terms longer than 30 days. Up to 60 days are only allowed with special agreements.
• Interest on arrears: In the event of late payment, creditors may claim default interest that is significantly above the base interest rate (9 percentage points in the B2B sector).
• Reminder fee: A flat rate of 40 euros can be charged additionally.

These regulations are intended to ensure that your company does not run into liquidity problems due to long payment periods or unreliable customers. For smaller companies in particular, these measures are an effective tool to avoid financial bottlenecks and to strengthen their own planning security.

Economic consequences of late payments for companies

Payment delays can impact your company on many levels and significant risks up to insolvency Bring with you. The consequences not only affect your finances, but also your operational business and long-term growth opportunities. Here are the biggest risks:

Liquidity problems and cash flow risks

Outstanding invoices can quickly lead to a domino effect. If your customers don't pay on time, you don't have the financial resources to meet your own obligations. This not only applies to recurring expenses such as salaries, rents or supplier invoices, but also your ability to react to unexpected costs.

Increased administrative burdens and costs in receivables management

Unpaid invoices mean that your claims management is more demanding. The process of getting defaulting customers to pay involves several steps that involve high administrative costs and tie up human resources. There are also external costs, for example for lawyers, collection agencies or a court order for payment. In the worst case, these additional costs may exceed the original invoice amount, especially for smaller claims.

Missed investment opportunities

Payment delays have a direct effect on your ability to invest. Blocked liquid assets are not available to your company to implement strategic projects, procure necessary investments or open up new business areas. In the long run, this can significantly weaken competitiveness.

Creditor's rights in the event of late payment

If customers do not pay their bills on time, you as a creditor have clear rights in the event of late payment to enforce your claims and minimize financial losses. These rights are regulated by law and offer you several options to claim outstanding amounts.

Interest on arrears and reminder costs

As soon as your customer defaults, you can claim default interest. According to Section 288 BGB, the interest rate is:

• 9 percentage points above the base interest rate in the B2B sector and
• 5 percentage points above the base interest rate in the B2C sector.

This should not only compensate for your outages, but also create incentives to pay bills on time. In addition, you have the right to charge reminder costs that cover the administrative costs for payment reminders and reminders.

You can find the current base interest rate on the website of Deutsche Bundesbank view.

Reimbursement of internal costs and lump sums

Another important point: As a creditor, you can also claim internal costs. For every overdue invoice, you are entitled to a Flat rate of 40 euros in accordance with Section 288 (5) BGB. This lump sum is used to at least partially offset your internal expenses — such as personnel and administrative costs. In addition, additional costs, such as for legal or collection services, can also be reimbursed in the event of larger claims.

Judicial payment procedure and debt collection

If your customer does not pay despite reminders, you can take legal action. A Judicial payment procedure allows you to obtain an enforceable title. With this, you can have your claim recovered through coercive measures such as account attachments or wage seizures. Alternatively, you can hire a collection agency to collect the debt for you. Both ways help you to take legally secure and effective action against defaulting payers.

Measures in case of and before late payment

Dealing professionally with late payments starts with a clear plan. Whether it's collecting outstanding receivables or making preventive provisions — a structured approach that saves you time, nerves and financial resources is crucial. Here you can find out which steps have proven effective in the event of late payments and how you can prevent it from the outset.

Step-by-step instructions in case of late payment

1. Friendly payment reminder:
   Often, a polite reminder is all it takes. Many customers pay directly when they are reminded of the outstanding invoice. Write in a friendly but clear way and set a new payment term.
2. Formal reminder:
   If payment is not made despite a reminder, you should send a formal reminder. Point out default interest and reminder fees to increase pressure. Set a binding deadline and make it clear which next steps will follow if no payment is made.
3. Last reminder:
   If the customer still shows no response, it is time for a final reminder. This is the final request before you take legal action. Be clear and unequivocal to enforce your claim.

How can late payments be avoided?

Even better than managing late payments is not letting them occur in the first place. Preventive measures such as clear payment terms, Credit checks with new business partners or the use of factoring can help you significantly reduce your risk. Also a transparent receivables management Automated payment reminders ensure that your invoices are paid on time.

In our article “Preventing late payments”, you will learn how to optimally implement preventive measures.

Managing late payments with Tidely

With a clear understanding of your rights in the event of late payments, structured measures and preventive claims management, you can effectively meet the challenges of late payments and secure your liquidity.

Here comes a Cash flow management software Like Tidely in the game: With Tidely, you always have a comprehensive Overview of your liquidity and recognize at an early stage what influence outstanding invoices have on your ability to pay. The tool supports you easily and efficiently in Invoice managementso that no appointment is missed anymore.

What Tidely can do for you:

• Real-time overview of all outstanding receivables: Thanks to the seamless connection of your billing system, you always have an overview of all invoices with their current status. You can immediately see which invoices have been paid, which need to be reworked and when reminders are due.
• Planning with the “Expected Date”: Thanks to this unique feature, you can plan reliably even if you are late in payment. It helps you to identify at an early stage which funds must be available and when or how you can cushion any bottlenecks.

In short: With Tidely Make your receivables management clear and predictable — perfect for keeping your company on track.

FAQ

What is late payment according to BGB?

According to Section 286 BGB, there is a delay in payment if a debtor fails to make a payment due on time. This occurs when the payment deadline is exceeded or — without a deadline — no payment is made 30 days after receipt of the invoice and due date. Creditors can claim interest on arrears and reminder costs.

What are the seller's primary rights in the event of late payment?

First, sellers can claim the original payment in the event of late payment. In addition, they can claim default interest (9 percentage points above the base interest rate in the B2B sector) and a reminder fee of 40 euros. In addition, they may send reminders, claim internal costs and, if necessary, take legal action.

What are subordinate rights in case of late payment?

According to the main claims arising from the overriding rights, creditors can also assert subordinate rights in the event of late payment. This includes:

• Securities: If the debtor has provided collateral such as a guarantee or mortgage, these can be claimed after the main claim.
• Secondary claims: Other contractual claims that are not directly part of the main claim may be claimed on a subordinate basis, such as compensation for unfulfilled deliveries or services.

How long can you be in default of payment?

Payment delays begin no later than 30 days after the due date and receipt of the invoice. The debtor remains in default until the claim is settled or an agreement is reached. Creditors can take legal measures as soon as the default occurs.

What to do with defaulting customers?

Start with a friendly payment reminder and, if there is no response, set a formal reminder with a deadline. As a last step, you can initiate legal measures such as a payment procedure or debt collection.