Mastering the art of debt recovery around the world, part 4: an expert guide to collections in France

October 5, 2023

Uncertain economic conditions mean more complex credit risk management. The pandemic, supply chain disruptions, and geopolitical tensions have led to higher inflation and rising energy and raw material prices, resulting in a strong rebound in unpaid invoices and company insolvencies.

In this context, working with an expert that fully understands the intricacies of collections and debt recovery is essential to securing your cash flow and managing credit risk. And local knowledge is essential, as every country and every jurisdiction differ in their legal frameworks and specific procedures.

Let’s explore the ins and outs of collections in France, the keys to ensuring success in a collections process, and the advantages of working with Allianz Trade. 

We handle two types of collection processes for our customers: in bonis or preventive procedures—used to reach an amicable agreement in case of non-payment—and collective or judicial proceedings, which happen when the customer is in financial distress or has been declared insolvent.

Let’s say a French retail company owes a supplier €500,000, and the invoice is overdue. The supplier contacts Allianz Trade, its trade credit insurer. We open a procedure on their behalf, declaring their claim with a letter of demand. If the retail company is “in bonis,” meaning it has not been declared insolvent, we negotiate a payment plan with them while ensuring that the business relationship remains constructive. In the case of insolvency, we negotiate with the court-appointed insolvency practitioner and use all the tools available to maximize the amount retrieved.

One essential tool we recommend our customers include in their general terms and conditions of sale to protect themselves is the “retention of title” clause, or “Clause de réserve de propriété”.  It stipulates that until payment has been made, the merchandise belongs to the seller. This allows the seller to recover the goods in stock or in their monetary value, without having to wait for a lengthy repayment plan to be put into place if their customer is in financial distress. 

A few factors in collections processes are unique to France. For example, the legal fees tend to be lower than those for similar proceedings in other countries, but the process can also be quite lengthy. There are a lot of deadlines to respect – and unlike in Italy, as my colleague Francesca Cochi explains in her article, it’s much harder to shift the deadlines and time constraints.

Speed and respecting the deadlines are essential to maximizing chances of recovering receivables in case of non-payment, especially in insolvency proceedings. The same is true for in bonis collections: we found that if customers declare the non-payment to us within the first 60 days after the invoice due date, we’ll have a 70% chance of recovering three-quarters of their receivables. After 90 days after the invoice due date, we’ll have a 70% chance of not recovering anything.

Delegating collections to a third party carries multiple benefits. Not only does it give access to legal experts that can help them navigate regulations and the numerous crucial deadlines, but it also helps to enlist an external party to negotiate without emotion and help preserve business relationships. Additionally, working with a reputable organization with a global footprint means debtors are more motivated to come to a speedy and amicable agreement. In France alone, our team of 90 collections experts recovered several hundred million euros for our customers through in bonis and insolvency proceedings. 

Collections can be an extremely complex process for any business – in terms of proceedings, impact on credit, and customer relationships. Working with a professional collections agency, such as a trade credit insurer, ensures that the procedure is handled with care, and that your company’s rights are protected.

Allianz Trade is present in more than 50 markets around the world. Our global vision and reach combined with our proximity to local courts and extensive knowledge of the country’s customs and legal frameworks ensure we’ll secure the best possible outcome for your company. That way, you can focus on what you do best: running your business.

Valentin Lanne

Head of Insolvency Proceedings
Allianz Trade in France