💧 Payment default and liquidity
In brief
If a business customer does not pay on time, you as creditor do not automatically fall into a trap – the law limits agreed payment terms and, once default occurs, entitles you to interest and a flat fee. What matters is to establish the default in a legally secure way and then proceed consistently (reminder, if necessary court dunning procedure – see the separate topic Contract law and dunning). At the same time you should plan your liquidity so that payment defaults do not themselves put you in difficulty; instruments such as factoring or trade credit insurance can cushion the risk.
Step by step
- Issue an invoice with a clear due dateFor monetary claims, default occurs at the latest 30 days after the due date and receipt of the invoice – even without a reminder (§ 286 para. 3 BGB).
- Limit payment termsWhere the debtor is a business, payment terms of more than 60 days are only effective if expressly agreed and not grossly unfair to the creditor (§ 271a para. 1 BGB).
- Claim default interest and the flat feeWhen default occurs, default interest of 9 percentage points above the base interest rate arises automatically for B2B monetary claims (§ 288 para. 2 BGB), as well as a flat fee of €40 (§ 288 para. 5 BGB).
- Send reminders and document themSend out-of-court reminders and document the deadlines you set.
- Consider the court dunning procedureIf payment is still not made, the court dunning procedure or a lawsuit follows (see topic Contract law and dunning).
- Adjust liquidity planningActively build the risk of payment defaults into your cash flow and consider factoring or trade credit insurance as a precaution.
Deadlines
- Many self-employed people send reminders too late or not in writing at all – without documented receipt of the invoice/reminder, the start of default is hard to prove.
- Default interest and the €40 flat fee are often not claimed, although they arise automatically by law and only have to be calculated and demanded.
- Long payment terms of more than 60 days are accepted without reflection, although without an express, fair agreement they may be ineffective.
- Liquidity planning is often based only on invoices issued rather than payments actually received – an invoice is not yet money in the account.
- Factoring is often only considered when a liquidity bottleneck already exists, instead of being used as a precaution.
- The default interest rate mentioned changes every six months with the base interest rate – when calculating, always look up the current value with the Deutsche Bundesbank, do not adopt a once-noted value permanently.
In depth · legal basis, figures and practice – for advisers and professionals
Payment terms between businesses (§ 271a BGB)
The provision protects the creditor – often the supplying self-employed person – against excessively long payment terms dictated one-sidedly by larger contracting parties. A clause of more than 60 days is only effective if expressly agreed and if it does not place the creditor at a grossly unfair disadvantage. Where the debtor is a public contracting authority a stricter rule applies: 30 days as the rule, 60 days as the absolute limit (§ 271a para. 2 BGB).
Occurrence of default (§ 286 BGB)
Besides the 30-day automatic rule for monetary claims, a reminder after the due date, a performance time fixed by the calendar or a serious and final refusal to perform also trigger default without a reminder.
Default interest (§ 288 BGB)
The rule is: 5 percentage points above the base interest rate where a consumer is involved (§ 288 para. 1 BGB), 9 percentage points for pure B2B monetary claims (§ 288 para. 2 BGB). Important for advice: check the current base interest rate with the Deutsche Bundesbank afresh for every calculation, as it can change on 1 January and 1 July of a year.
Instruments for the risk of payment default
Factoring means selling outstanding receivables to a factor in exchange for immediate liquidity, for a fee or an interest discount. Trade credit insurance or bad debt insurance is a private-sector product with no statutory obligation that protects against payment defaults, usually tied to a credit check of the buyer. Both instruments were named in the underlying research only as business management instruments, not examined in legal detail.
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