Delegation of payment
|This kind of contract can limit or even cancel the risk of bad debts in case your client is not creditworthy, but his own client is fully reliable.
You are paid directly by the client of your client. This is a three parties contract.
A contract with the supplier (the delegatee), the buyer (the delegator) and the client of the buyer (the delagate) is drawn in which the delegate agrees to pay the delegatee directly, although the supplier bills the delegator.
There are two kinds of delegation of payment:
|It is possible that your client refuses to establish a delegation of payment. This denial is usually motivated by one of these two reasons:
Direct paymentSimilar to the delegation of payment with the difference that the final customer is a public company. Risk of bad debt is null.
The account receivables assignment
Contrary to the delegation of payment, the contract of assignment of receivables concerns only the owner and the assignor. The end customer (the payer) does not appear in the contract.
Owner: is the one who performs the service for the end customer (on which he has a debt)
Assignor: the subcontractor to whom the debt is transferred from the owner. If the final buyer doesn’t pay, the owner must pay.
| The account receivables assignment is particularly suitable if the payer is a government and if the owner (your customer) is not creditworthy.
You become the owner of receivables that your client owns on its client. In fact you are not concerned anymore with the possible insolvency of your customer.
In case of insolvency proceedings of your client, the administrator or liquidator can not claim this money as by this contract it is not anymore in your client's assets.
Next: parent company guarantee
Kit including 7 tools to secure its receivable:
- Bank guarantee on demand,
- content of a bank guarantee,
- suspension and termination clauses,
- property reserve,
- forfeiture of the term clause,
- 2 types of parent company guarantees.
Articles on the same topic
Not yet registered? The subscription allows downloading and unlimited use of all files of Credit Management tools.
All news about collection and credit management
Track your current month's recovery rate on My DSO Manager
Zoom on the DSO
News of My DSO Manager
Tutorials about collection levels have been updated
Credit Manager: Anatomy of an unusual species
Words of experts
Find the latest articles of collections and credit management specialists
Why should you use a cash collection software?
Why should you chase your customers before the due date of your invoices?
Did you know your Credit Application Could be Costing you Money?
Your site has an astonishing clarity. Well done!
Find Credit Management tools on your favorite social networks