Belated payments happen. But if the recipient is overdue with his payment, it’s time to stand your ground to get your money for unpaid invoices. Today’s article will take a closer look at the various stages between delivery and payment. We’ll focus on the preconditions, circumstances and properties of each.

The minute details – what is required for an invoice

After you deliver the goods or perform your service, payment is due. Typically, the client receives the invoice including a payment due date, to grant him some leeway for payment.

In Germany, to obligate the customer to his payment, the invoice itself needs to fulfil several formal criteria to be legally valid. Article 14 of the Value Added Tax Act (UStG) of Germany lists these in detail. Here is a summary:

  • Full name and address of the delivering party
  • VAT-ID or tax number of the delivering party
  • Full name and address of the receiving party
  • Invoice date (date of issuing the invoice)
  • Continuous invoice number (provided uniquely by the delivering party)
  • Amount and number of delivered goods resp. the kind and amount of services rendered
  • Date of delivery or service
  • The full payment sum including the tax, invoiced items separated by applicable tax rates resp. the explicit note of taxes not applying

Furthermore, the invoice should include these things (if applicable):

  • Reductions of payment if negotiated in advance
  • Notice of tax obligation by the recipient of the services
  • Notice of the recipient’s obligation to safe keep the invoice document

The contents of the invoice should naturally be complete and truthful regarding the provided goods or services. If a confirmation of order or work contract exists, it may serve as additional proof. Also, it may help identify the invoice’s contents.

The still unpaid invoices – what is important for a payment reminder

Usually, the recipient will pay the invoiced amount before the due date in full. If he fails to do so, it may be time to remind him of the payment obligation. This is already the first requirement for a dunning measure: It needs to take place after the agreed due date; before that, it has no legal validity.

The text of the reminder does not necessarily need to contain the words “dunning” or “reminder”; it serves only to admonish the recipient to the payment obligation he already knows. Here, then, is the second requirement: The dunning needs to be precise and distinct, so the recipient may recall, exactly which obligation is concerned.

Therefore, dunning letters should always contain the precise subject of payment obligation and thus of the reminder. Consequently, these elements should be part of the dunning letter:

  • The invoice number and invoice date
  • The delivery slip number and delivery date resp. the date of service
  • A repeated mentioning of the due date may express the urgency

In practice, invoice creators send three dunning letters, although only one reminder is required.

Usually, the dunning or reminder is in written form; a registered letter will certify delivery. Upon receipt of the reminder, the recipient is officially in default. From this point on, the invoice creator may take legal action for economic damages (damage caused by default).

If the invoice recipient will not pay after the dunning, the payment obligation can only be enforced by a collection agency.

Your money, your claim, your right – what collection services do

Collection agencies are better than their reputation. Legally entitled to enforce a payment obligation in the place of the invoice creator, they will receive a fee for this service. Should there be a delay in payment, collection agencies are able to an illicit payment of the obligated party through special knowledge and specialized attorneys. The enforcement of a vetted and dunned title by an authorized bailiff is only the last step. Collection agencies take this measure only if all previous steps of establishing a mediation between the creditor and the debtor have been exhausted.

A respectable collection agency has no need for intimidation or threats. Still, the term “collection” itself still carries a negative connotation.

Using a collection service is often the last resort to realize an outstanding claim. as the invoice creator just wants to receive a fair compensation for the completed job.

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